Watch Out for New Small Cap Fund from Quantum AMC That Addresses Liquidity Challenge

By Consultants Review Team Friday, 13 October 2023

Quantum AMC has announced the launch of a new fund offer (NFO) - Quantum Small Cap Fund - an open-ended equity scheme that invests primarily in Small Cap Stocks. The program will go on sale on Monday, October 16, and will end on Friday, October 27, 2023. Chirag Mehta, Chief Investment Officer, and Abhilasha Satale will co-manage it.  

Quantum AMC said in a statement that the scheme will be benchmarked to the S&P BSE 250 Small Cap total return index (TRI). Its investment goal is to achieve capital appreciation through investments in small-size stocks. The program will have two plans: direct and regular. The fund managers will deploy 65%-100% of their assets to Small Cap Company stock and equity-related products. The scheme's investment philosophy includes the following:

According to Chirag Mehta, Chief Investment Officer & Fund Manager at Quantum AMC, this fund is intended for investors seeking long-term wealth appreciation.

"We have seen that small-cap stocks have the potential to provide good returns over the long term." We will invest in lesser-known, smaller firms with growth opportunities to ensure strong returns for our customers. "These companies increase their revenue and earnings over time, which can ensure good returns for our investors," he said.

The largest hurdle in the small-cap mutual fund industry today, according to Mehta, is a huge asset under management (AUM). Large AUM funds are prone to liquidity concerns if they end up controlling a significant portion of the market capitalization of a small-cap stock. They may be forced to have a large tail of stocks with insignificant weights. They may be obliged to sit on cash or invest extra inflows into mid or large-cap names, which is not the goal of a small-cap fund.

The Quantum Small Cap Fund will limit its AUM size to an optimal level, which will enable it to hold a high-conviction, liquid portfolio of promising small cap businesses," Mehta stated in a press release. 

In addition, I. V. Subramaniam, MD & Group Head- Equities, Quantum Advisors - Sponsor of Quantum Mutual Fund, stated, "Many of the new startups that have sprung up to solve many problems faced by the population could eventually list as small-cap companies and then grow into sizable companies in the mid-cap or large-cap space."

"The economy's growth will be led not only by large corporations, but also by the rapid growth of the many startups that have sprung up in recent years." Quantum Mutual Fund is well-positioned to boost its investors' portfolios with Quantum Small Cap Fund, as it has a strong track record since 2006 that displays prudent portfolio management and responsiveness to market changes.

Through a meticulously curated and diverse portfolio, this scheme aims to provide exposure to companies," he added.

The AMC stated that fund managers will be rigorous about fund capacity and aware of high size becoming an impediment to fund performance for this NFO. "Liquidity will be prioritized, as will a high conviction portfolio of 25-60 stocks for optimal diversification." Quantum will have limited ownership in individual stocks, with stakes generally limited to 5% of market value," it stated. 

Quantum AMC will also maintain a significant equity exposure by requiring a minimum weight of 2% at cost in each stock. According to the AMC, this method will reduce concentration risk and encourage a balanced portfolio by providing a well-managed and diversified small-cap that matches with long-term financial goals.

Current Issue