Mutual Fund Weekly Analysis: Quant Flexi Cap Fund

[Read: Best Flexi Cap Mutual Funds to Invest in 2023 - Top Performing Flexi Cap Mutual Funds in India]

Past performance is not an indicator of future returns
Data as of August 23, 2023

Quant Flexi Cap Fund's performance in the last couple of years has been outstanding. The fund managed to limit the downside risk compared to the benchmark and many of its peers during the market crash of 2020. Moreover, Quant Flexi Cap Fund tops the returns chart in the current bull phase. The recent robust performance has helped the fund maintain a noteworthy lead over the benchmark and most of its peers across time frames.

It is important to note that Quant Flexi Cap Fund's volatility (standard deviation) is the highest in the Flexi Cap Fund category and is much higher than the benchmark. Nonetheless, the remarkable returns generated by the fund have helped it score high on risk-reward parameters. The Sharpe ratio of the fund, as denoted by its risk-adjusted returns, is currently one of the highest in the Flexi Cap Fund category.

What is the investment strategy of Quant Flexi Cap Fund?

Quant Flexi Cap Fund has the mandate to invest a minimum of 65% of its assets in equity and equity-related instruments with no market cap or sector limit. Accordingly, the fund invests in a mix of large-cap, mid-cap, and small-cap companies. The allocation in each of these segments is decided by the fund manager by taking stock of the macroeconomic view. Quant Flexi Cap Fund focuses on the sentiments of the market participants through an in-house predictive analytical tool. This predictive analytics tool is called the VLRT framework, viz. Valuations, Liquidity, Risk, and Timing. Here are the key features of the framework:

Valuation Analytics: Knowing the difference between price and value

Liquidity Analytics: Understanding the flow of money across asset classes

Risk Appetite Analytics: Perceiving what drives market participants to certain actions and reactions

Time: Being aware of the cycles that govern how the other three dimensions interact

Quant Flexi Cap Fund lays emphasis on identifying companies with strong sustainable competitive advantages in good businesses and having sound managements. It follows an aggressive investment approach wherein it constantly looks for opportunities to generate high alpha. In other words, the fund holds many of its stocks with a short-term view, and as a result, the fund has recorded a high portfolio turnover of around 80-230% in the last one year.

Quant Flexi Cap Fund usually holds around 35-45 stocks in its portfolio. As of July 31, 2023, the fund held 33 stocks in its portfolio with the top 10 stocks accounting for 43.4% of its assets. Quant Flexi Cap Fund's top stock holding comprises mainly of large-cap stocks such as Reliance Industries, HDFC Bank, DLF, SBI, and NTPC. The fund also currently holds an allocation of around 32.4% in Derivatives - Futures.

In the last two years, Quant Flexi Cap Fund has benefitted immensely from its exposure in Strides Pharma Science, Jindal Steel & Power, Punjab National Bank, Usha Martin, Tata Communications, Tata Consumer Products, SBI, and NTPC, among many others that have grown remarkably in value since the fund added them in its portfolio. Meanwhile, it has booked substantial profits in The Indian Hotels Company, Zensar Technologies, Dr Reddy's Laboratories, Macrotech Developers, and ITC, among others.

Sector-wise, Quant Flexi Cap Fund favours the Banking & Finance sector. It also has significant exposure in Metals, Petroleum, Cement, Pharma, Construction, Power, and Media having allocation in the range of 5-12%. Additionally, the portfolio is also diversified across Transportation, Infotech, Engineering, and Telecom.

Is Quant Flexi Cap Fund suitable for my investment goals and risk tolerance?

Earlier classified as a consumption-oriented Thematic Fund, Quant Flexi Cap Fund is now categorised under the Flexi Cap Fund category. The fund enjoys the flexibility to invest in a mix of large-cap, mid-cap, and small-cap stocks. Quant Flexi Cap Fund stood strong during the 2020 market crash, wherein it outpaced the benchmark and many of its peers. Moreover, the fund has topped the category returns in the current bull phase, thereby generating significant alpha for its investors. Quant Flexi Cap Fund is quick in its approach to shift allocation between market caps and sectors depending on the market conditions.

Though the volatility registered by Quant Flexi Cap Fund is much higher than the benchmark and the category average, it has generated a higher premium for the level of risk taken as denoted by its Sharpe ratio. The active investment strategy of identifying multi-bagger stocks has resulted in high alpha for investors in Quant Flexi Cap Fund.

The aggressive investment strategy and significant exposure to stocks in the lower market cap makes Quant Flexi Cap Fund suitable only for investors with a very high risk appetite and an investment horizon of at least 5-7 years.

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

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DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

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Details of associates

1. Money Simplified Services Private Limited;

2. PersonalFN Insurance Services India Private Limited;

3. Equitymaster Agora Research Private Limited;

4. Common Sense Living Private Limited;

5. Quantum Advisors Private Limited;

6. Quantum Asset Management Company Private Limited;

7. HelpYourNGO.com India Private Limited;

8. HelpYourNGO Foundation;

9. Natural Streets for Performing Arts Foundation;

10. Primary Real Estate Advisors Private Limited;

11. HYNGO India Private Limited;

12. Suresh Lulla;

13. I V Subramaniam.

1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

1. The Research Analyst has not served as an officer, director or employee of the subject Company.

2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

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Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

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