Quant Mutual Fund is
coming out with a NFO in the form of Quant Large Cap Fund.
Quant Large Cap Fund
would be a large cap fund requiring minimum 80% allocation to large cap stocks
at all times.
The fund would be open
for subscription from July 20, 2022 to August 03, 2022.
NFO
details for Quant Large Cap Fund
|
Scheme Opens |
20/07/2022 |
|
Scheme Closes |
03/08/2022 |
|
Fund Manager |
Mr. Sandeep Tandon Mr. Ankit Pande Mr. Vasav Sahgal Mr. Sanjeev Sharma |
|
Benchmark |
Nifty 100 TRI |
|
Minimum Investment |
5,000 |
|
Fund Category |
Large Cap |
|
Exit Load |
Nil |
Quant Large Cap Fund
would be an open – ended large cap fund requiring minimum 80% investment into large
cap stocks at all times while the remaining 20% can be invested as per the will
of the fund manager.
Quant
Large Cap Fund Investment Objectives
The investment
objective of the fund is to generate long term capital appreciation by
investing primarily in equity & equity related instruments of large cap
stocks..
There is no guarantee
that the investment objectives of the scheme would be achieved.
Quant
Large Cap Fund Allocation
The asset allocation
for the fund would be something like this
|
Asset Class |
Minimum % |
Maximum % |
|
Equity and Equity Related instruments of large cap companies |
80 |
100 |
|
Equity and Equity Related instruments of companies other than large cap |
0 |
20 |
|
Debt and money market instruments |
0 |
35 |
|
Units issues by REITS and InvITs |
0 |
10 |
The above figures are
only indicative and not fixed, the fund managers have the liberty to move
across the asset classes depending upon prevailing market conditions as long as
they remain within the mandate permitted.
The fund can also
invest in REITs and InvITs if so desired.
A nfo means a new fund from a mutual fund
house which was not available earlier.
With growing acceptance of mutual funds as
a form of investment, mutual fund houses periodically introduce new fund offers
so as to complete their basket of investments available for investors.
A NFO is usually what results in the
beginning of a mutual fund scheme.
Other reasons being merger of schemes
within the same fund house or merger or acquisition of two or more fund houses,
these are rare instances though.
Additional reading: Click Here to read why should Not invest in equity mutual funds
NFO meaning
A nfo or a new fund offer is a method by
which a mutual fund scheme raises the initial investment into the fund.
The new fund offer is available for
purchase for a limited number of days only.
After which it becomes unavailable for
fresh purchase or redemption for a couple of days.
Once this time duration is complete, the
nfo no more remains a nfo and is treated like any other open ended mutual fund
scheme.
In which you can invest and redeem as and
when you please, considering it is an open ended fund and you comply with the
necessary exit load calculations.
Additional reading: Click Here to read whether you are affected by the Dilderot Effect
What are Large cap
mutual funds
A large cap mutual fund by SEBI regulations
needs to invest a minimum 80% of its total aum in the top 100 companies by
market capitalization.
Categorization of
companies
Large Cap: 1st -100th company
in terms of full market capitalization.
Mid Cap: 101st -250th company
in terms of full market capitalization.
Small Cap: 251st company
onwards in terms of full market capitalization.
This rule therefore does not allow a large
cap mutual fund to diversify much beyond the top 100 companies.
Large cap mutual funds because of the rule
to invest mostly in the top 100 companies by market capitalization end up with
companies that are leaders in their respective fields.
At times flexi cap mutual funds when their
aum becomes really large convert themselves into a large cap fund, although
this is not a rule but more of a choice.
This is done because liquidity becomes a
challenge with stocks besides large cap stocks.
Case in point Mirae Asset Large cap fund
was primarily a flexi cap mutual fund that was converted to a large cap fund.
What is quant
model?
The Merriam-Webster dictionary defines Quant as
‘’An expert at analyzing and managing quantitative
data’’
A Quant based Mutual Fund Scheme is one
that is far more driven by number, statistics and data than a macro- economic
approach.
Now what constitutes these numbers varies from Fund
House and at times, even schemes. For some it might be the quarterly results to
the PE ratio.
This approach for example would be more reactive to
the effect of a change in RBI Governor has on the market prices rather than
predicting what effect it would have in the future.
Meaning the mere change in RBI Governor has
absolutely no bearing on its functioning but if the change has an effect on the
stocks it holds and wishes to sell or buy then it would react accordingly.
The stock selection process is quantitative driven
and human intervention is limited, it picks up stocks based on their number
irrespective of other factors.
Robert Merton is considered one of the founding
fathers of quantitative study and this was way before the advent of modern
computers. With modern changes, it was imbibed with technology and is today
used by financial institutions around the world including Fund Managers.
The fundamental approach of this practice is to
break down complex mathematical data to look for alpha or excess return. There
has to be something more than what a Fund Manager can provide and that is where
its value comes into the picture.
Should you invest
in a nfo?
You
can consider it if:
The new fund offer is a category of fund
that is not existent in your mutual fund portfolio.
If it is going to be a part of your
satellite portfolio.
If it adds a unique touch to your mutual fund
portfolio.
If you understand the functioning,
objectives and risks attached with the new fund offer.
The nfo mutual fund is aligned with your
risk profile.
You
should avoid it if:
The new fund offer is not going to add
anything of unique significance to your mutual fund portfolio.
If the nfo is going to be a part of your
core portfolio.
If the only reason you are investing is due
to FOMO (Fear of missing out).
If you do not understand the investment
style and risks attached with the nfo.
The nfo mutual fund is not aligned with
your risk profile.
For portfolio enquiries, email us with your doubts at info@themutualfundguide.com
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