homepersonal finance NewsQuant Mutual Fund's CIO believes stress test will help investors make informed decisions — Here's how
Quant Mutual Fund's CIO believes stress test will help investors make informed decisions — Here's how
According to the stress test results, the Quant Mid Cap Fund can liquidate 50% of its portfolio within six days, with 25% being liquidated in just three days.
Several fund houses have disclosed the outcomes of stress tests conducted on their small-cap and mid-cap funds, with others expected to follow suit by Friday (March 15) evening. This move comes in response to directives from the Association of Mutual Funds in India (AMFI), which mandated fund houses to conduct stress tests on their mid- and small-cap schemes using last month's data and disclose the results before March 15.
Sandeep Tandon, the Founder & Chief Investment Officer (CIO) of Quant Mutual Fund, views these stress tests and the accompanying disclosures as a positive step forward.
He elaborated on the regulatory intent behind these measures, stating, "The regulator is emphasising the importance of transparency by urging asset management companies (AMCs) to assess investors' risk appetite and investment horizon, particularly in light of recent rallies in mid and small-cap stocks."
Tandon highlighted the regulator's push for additional data disclosure, focusing on portfolio risk levels and liquidity metrics.
While talking exclusively to CNBC-TV18, he stressed the significance of this information in enabling investors to make well-informed decisions regarding their investments in mid and small-cap schemes, including the option to switch to alternative schemes if necessary.
Tandon said, "We have begun providing numerous data points in our monthly factsheets, not only for specific schemes but across all the funds we manage."
Reflecting on the recent market trends, Tandon highlighted a shift in their approach towards a more balanced allocation, with a significant portion now dedicated to large-cap stocks, aiming to navigate the evolving market dynamics effectively.
He mentioned that Quant Mutual Fund's investment portfolio maintains a reasonable level of liquidity, and currently, there are no restrictions imposed by the regulator.
He explained that over the past one to one and a half years, starting from September 2021, there has been a noticeable shift in the global market sentiment, characterised by a phase of euphoria that has since peaked.
"In response to this changing market environment, the fund has gradually adjusted its strategy by increasing exposure to large-cap stocks. Currently, approximately 28-30% of the portfolio consists of large-cap stocks alongside mid and small-cap holdings," he told CNBC-TV18.
According to the stress test results, the Quant Mid Cap Fund can liquidate 50% of its portfolio within six days, with 25% being liquidated in just three days.
Similarly, the Quant Small Cap Fund can liquidate 50% of its portfolio in 22 days, with 25% being liquidated in 11 days, signifying reasonable liquidity levels.
Despite pockets of high valuation and hype in certain market segments, Quant Mutual Fund maintains a constructive long-term outlook on mid-cap and small-cap investments.
Quant Small Cap Fund is among the 10 top schemes in the category with assets under management (AUM) of ₹17,193 crore as of February end.
Quant Mid Cap Fund had an AUM of ₹5,422 crore as of February 2024.
A look at midcap stress test outcomes of key AMCs
| AMC | Number of days for 25% liquidation | Number of days for 50% liquidation | Fund AUM (₹crore) |
| Edelweiss | 1 | 2 | ₹5,066 crore |
| Aditya Birla SL | 2 | 4 | ₹4,981 crore |
| Sundaram | 2 | 4 | ₹10,262 crore |
| Quant | 3 | 6 | ₹5,443 crore |
| Motilal | 5 | 10 | ₹8,481 crore |
| Axis | 6 | 12 | ₹25,248 crore |
A look at smallcap stress test outcomes of key AMCs
| AMC | Number of days for 25% liquidation | Number of days for 50% liquidation | Fund AUM (₹crore) |
| Edelweiss | 2 | 3 | ₹3,199 crore |
| Motilal | 2 | 3 | ₹1,491 crore |
| Sundaram | 3 | 5 | ₹3,055 crore |
| Aditya Birla SL | 5 | 10 | ₹5,382 crore |
| Quant | 11 | 22 | ₹17,232 crore |
| Axis | 28 | 14. | ₹19,604 crore |
(Edited by : Amrita)
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