Quant Mutual Fund (MF), known for its rapid growth over the past few years, has recently experienced its first quarterly decline in average assets under management (AUM) since June 2020. This downturn is attributed to market corrections and a notable slump in the performance of its equity funds, marking a significant shift in its growth trajectory.
Quant MF’s AUM decline is the first since June 2020, reflecting broader market challenges.
The Quant Smallcap Fund’s NAV decline of nearly 8% outpaced the 5% drop in its index.
Key Points
- AUM Decline: Quant MF’s average AUM fell to Rs 96,697 crore in Q3 2024, a 0.4% decrease from the previous quarter.
- Industry Comparison: While Quant MF’s AUM growth has lagged behind the broader industry, which saw a 3.6% increase, it remains the fastest-growing large fund house year-on-year, with a 138% increase from December 2023.
- Performance Issues: The underperformance of key schemes, particularly the Quant Smallcap Fund, has contributed to the decline in AUM, with a nearly 8% NAV drop compared to a 5% decline in the benchmark index.
- Investor Sentiment: Recent underperformance has led to a slowdown in new investment accounts, with only 0.3 million added in the December quarter, down from 0.76 million previously.
- Focus on Risk-Adjusted Returns: The fund house emphasizes evaluating performance through risk-adjusted metrics rather than absolute returns, suggesting a shift in investment strategy.
Detailed Breakdown
AUM Decline
Quant MF’s QAAUM reached Rs 96,697 crore in the quarter ending December 2024, marking a notable decline for the first time in five years. This decline is particularly striking as it is the first instance where Quant’s AUM growth has been slower than the overall industry growth.
Comparison with Industry Growth
Despite the recent slump, Quant MF’s year-on-year performance is impressive, with a 138% increase in AUM from Rs 40,675 crore in December 2023. In contrast, the mutual fund industry as a whole reported a 3.6% quarter-on-quarter growth, reaching Rs 68.6 trillion.
Performance Issues
The decline in performance is primarily linked to the underperformance of the Quant Smallcap Fund, which has struggled against the BSE 250 Smallcap TRI index for three consecutive quarters. In the last quarter, the fund’s NAV fell nearly 8%, highlighting the challenges faced by Quant’s equity schemes. This underperformance is compounded by high allocations to Reliance Industries, which has seen a significant decline.
Investor Sentiment and Account Growth
The recent performance slump has negatively impacted investor sentiment, leading to a decrease in new investment accounts. The fund added only 0.3 million accounts in the December quarter, a stark drop from 0.76 million in the previous quarter. This trend reflects growing caution among investors amid performance concerns.
Emphasis on Risk-Adjusted Returns
Sandeep Tandon, the founder and CIO of Quant AMC, urges investors to assess fund performance based on risk-adjusted returns rather than solely on absolute returns. The firm advocates for a comprehensive evaluation using metrics such as the Sharpe ratio, Sortino ratio, and Jensen’s Alpha, which consider both risk and return, providing a clearer picture of a fund’s performance.
Important Details & Evidence
- Quant MF’s AUM decline is the first since June 2020, reflecting broader market challenges.
- The Quant Smallcap Fund’s NAV decline of nearly 8% outpaced the 5% drop in its index.
- The fund house’s growth has been hindered by recent allegations of front-running and ongoing regulatory scrutiny.
Final Takeaways
Quant Mutual Fund’s recent performance slump marks a significant shift in its growth narrative, impacted by underperformance in key equity schemes and market corrections. While the fund continues to grow impressively on a year-on-year basis, its recent quarterly decline raises concerns about investor confidence and future inflows. The emphasis on risk-adjusted returns highlights a strategic pivot, encouraging investors to adopt a more nuanced approach to evaluating fund performance. Overall, while challenges persist, Quant MF remains a notable player in the mutual fund landscape.
