Quant large cap fund opens for subscription: Key factors to consider before investing

Quant Mutual Funds recently introduced the 'Quant Large Cap Fund NFO' — an open-ended large-cap fund. The new fund offer (NFO) will be available for subscription untill August 3, 2022.

This is an actively managed portfolio and will invest primarily in large-cap stocks. Sandeep Tandon, Ankit Pande, Sanjeev Sharma and Vasav Sahgal are the fund managers who will actively invest in such securities in order to maximise returns while safeguarding investor capital, the fund house said in a statement.

Well, large-cap funds are always a good option if investors want high equity exposure for long-term wealth generation, said Sanjiv Bajaj, Joint Chairman and Managing Director, Bajaj Capital Ltd while talking exclusively to CNBC-TV18.com.

"It had the highest net assets under management (AUM) for the month of June, totaling Rs 2,12,074.38 crore, according to data from the Association of Mutual Funds in India (AMFI). For the month of June, the positive inflow for large-cap funds was Rs 2,130.35 crore, the second-highest among equity funds after flexi cap fund. Also, if investors are new to mutual fund investing and want to know which funds can provide good returns over the long term while posing relatively lower risk-large cap funds is the answer," Bajaj told CNBC-TV18.com.

Bajaj pointed out four key reasons as to why investors should go for quant NFO:

VLRT framework is a combination of four elements, namely: valuation analytics, liquidity analytics, risk appetite analytics and timing.

"With the VLRT framework, quant will be able to generate alpha by identifying sectors and securities at inflection points and executing sector rotations early," Bajaj said.

To generate alpha, the scheme will invest at least 80 percent of its portfolio in large-cap stocks and 20 percent in stocks from the Nifty 500 universe in a dynamic manner.  It will have the ability to generate extra alpha by writing call options (up to 20 percent of portfolio value) and hedge the portfolio on inflection points to ensure the portfolio can effectively combat market volatility, according to Bajaj.

Since the scheme will invest in blue-chip companies known for their high performance and stable profitability, Bajaj said it will be better positioned to generate capital appreciation for investors over time.

"These companies' growth, revenue generation, and income are consistent because they are large, market leaders, financially sound and have strong business moats. They are comparatively less affected by market fluctuations and thus provide portfolio stability," he added.

Another advantage is that large-cap equities have better liquidity, even in volatile market conditions. This also helps to keep the impact on prices lower during volatile market periods.

Large-cap offerings have the potential to weather multiple market cycles. They not only thrive during a bull market, but they can also withstand market volatility.