Quant Flexi Cap Fund: Outperforming with Dynamic Market Cap Allocation

Quant Flexi Cap Fund is a Flexi Cap Fund that follows an active investment strategy to identify high-growth stocks and dynamically shifts the portfolio mix across large-cap, mid-cap, and small-cap companies. Over the past few years, this fund has demonstrated remarkable growth, consistently outperforming its benchmark and delivering substantial alpha for its investors.

Originally launched as a thematic fund in September 2008 by Escorts Mutual Fund (which was later acquired by the Quant group in 2018), the Quant Flexi Cap Fund has undergone several transformations in its investment mandate. Initially categorised as a sector-oriented scheme focusing on stocks in the power and energy sectors, it transitioned to become Quant Consumption Fund in 2018, with a new focus on consumption-driven companies. Subsequently, in January 2022, the fund underwent another transformation, leading to its reclassification and renaming as Quant Flexi Cap Fund.

Under its current Flexi Cap Fund mandate, Quant Flexi Cap Fund enjoys the flexibility to invest across market caps and diverse sectors. Consequently, the fund's historical long-term performance is not comparable. However, the fund has excelled under its current mandate, emerging as the top-performing scheme in its category. Following a period of underperformance between 2018-2019, characterised by changes in sponsor (from Escorts to Quant group) and the fund management team, Quant Flexi Cap Fund has demonstrated a smart recovery and a remarkable turnaround. This resurgence can be attributed to its in-house risk mitigation and predictive analysis tool called VLRT.

Quant Flexi Cap Fund's proactive approach to timely investments in attractive opportunities has proven highly effective, propelling it to surpass both benchmark and category average across time frames. The fund's stellar performance has attracted investor's attention. In the last two years, the fund's corpus has surged from just Rs 310 crore to Rs 5,563 crore as of April 2024.

In terms of returns, Quant Flexi Cap Fund has delivered impressive growth, boasting a robust CAGR of 32.6% over the past five years, compared to just 18.1% for its benchmark Nifty 500 - TRI. An investment of Rs 10,000 in Quant Flexi Cap Fund five years back would have now quadrupled to Rs 40,994 as against a valuation of Rs 22,995 for a simultaneous investment in its benchmark.

Over the past few years, Quant Flexi Cap Fund has established an outstanding track record, consistently ranking among the top performers in the Flexi Cap Fund category. The fund has consistently outpaced its benchmark, the Nifty 500 - TRI index, by a significant margin across various time frames. In the last 3 years, Quant Flexi Cap Fund has delivered a remarkable 35% CAGR on a rolling return basis, generating an impressive alpha of over 13.5 percentage points and placing it among the category toppers.

Over the longer 5-year and 7-year periods, Quant Flexi Cap Fund has outperformed the benchmark and the category average by approximately 10 and 7 percentage points, respectively, on a rolling return basis. Its short-term performance is equally remarkable, with the fund significantly outperforming the benchmark and most of its peers.

Quant Flexi Cap Fund follows an opportunistic investment strategy, which has resulted in higher volatility compared to the benchmark and is the highest in the category. Despite this, the exceptional returns generated by the fund have helped it score high on risk-reward parameters. The Sharpe ratio, which measures risk-adjusted returns, is currently among the highest in the Flexi Cap Fund category, underscoring the fund's ability to deliver superior performance despite its higher risk profile.

[Read: Flexi Cap Funds: A Sensible Choice That's Attracting Investors]

What is the investment strategy of Quant Flexi Cap Fund?

Quant Flexi Cap Fund is mandated to invest a minimum of 65% of its assets in equity and equity-related instruments without any limit or restrictions on market cap or sector allocation. This flexibility allows the fund to invest in a diverse mix of large-cap, mid-cap, and small-cap companies. The allocation in each of these segments is decided by the fund manager by taking stock of the macroeconomic outlook. Quant Flexi Cap Fund focuses on the sentiments of the market participants through an in-house predictive analytical tool called the VLRT framework (Valuations, Liquidity, Risk, and Timing). The key features of this framework include:

1. Valuation Analytics: Knowing the difference between price and value

2. Liquidity Analytics: Understanding the flow of money across asset classes

3. Risk Appetite Analytics: Perceiving what drives market participants to certain actions and reactions

4. Timing: Being aware of the cycles that govern how the other three dimensions interact

Quant Flexi Cap Fund emphasises identifying companies with strong and sustainable competitive advantages, solid business models, and competent management. Following an aggressive investment approach, the fund constantly looks for opportunities to generate high alpha. This often involves holding many of its stocks with a short-term view, resulting in a high portfolio turnover rate, which has ranged between 100-400% over the past year. This dynamic strategy enables Quant Flexi Cap Fund to adapt swiftly to market conditions, aiming to maximise returns while maintaining a robust risk management approach.

Quant Flexi Cap Fund demonstrates a distinct preference for momentum-driven stocks, setting it apart from its peers. The fund typically maintains a concentrated portfolio of around 25-40 stocks, allowing it to capitalise on high-growth opportunities and market trends effectively. This focused approach enables the fund to potentially deliver superior returns by investing in stocks that exhibit strong upward price movements.

As of April 30, 2024, the fund held 32 stocks in its portfolio with the top 10 stocks accounting for approximately 48% of its assets. Quant Flexi Cap Fund's top stock holding comprises mainly large-cap stocks, along with a few mid-cap and small-cap stocks and includes names such as Reliance Industries, Kotak Mahindra Bank, JIO Financial Services, TCS, Samvardhana Motherson International, Adani Power, Swan Energy, etc. The fund also currently holds an allocation of around 11.2% in Derivatives - Futures for hedging purpose.

In the last two years, Quant Flexi Cap Fund has benefitted immensely from its exposure in Reliance Industries, Aurobindo Pharma, GAIL (India), Tata Power Company, LIC of India, HUDCO, Jubilant Pharmova, Chambal Fertilisers and Chemicals, Poonawala Fincorp, Swan Energy, Adani Green Energy, Adani Power, JIO Financial Services, Anand Rathi Wealth, BHEL, Punjab National Bank, Jindal Steel and Power, and Hindalco Industries, that have grown remarkably in value since the fund added them in its portfolio. Meanwhile, it has booked substantial profits in Macrotech Developers, Usha Martin, Sun Pharma, Capri Global Capital, Strides Pharma Science, The Karnataka Bank, DLF, and LTI Mindtree, among many others.

Sector-wise, Quant Flexi Cap Fund currently favours the Banking & Finance, Power, and Petroleum sectors that collectively form about 41% of its assets. It also has diversification in Construction, Infotech, Fertilisers, Auto Ancillaries, Engineering, Consumption Pharma, and Oil & Gas. The top 5 sectors account for 47% of its assets.

[Read: Multi-cap Fund v/s Flexi-cap Fund: Which is a Better Fit for Your Portfolio?]

Is Quant Flexi Cap Fund suitable for my investment goals and risk tolerance?

Quant Flexi Cap Fund has demonstrated robust growth and established an unbeatable performance track record in recent years. The fund consistently ranks among the top performers in its category across both short to long-term time frames. Quant Flexi Cap Fund's active investment approach and the ability to timely identify high-growth, multi-bagger opportunities across market caps and sectors have enabled it to generate a remarkable lead over its benchmark and most of its category peers.

Although Quant Flexi Cap Fund frequently churns its portfolio, resulting in an elevated turnover ratio-the highest in its category (currently between 100% to 400%)-it has managed to reward investors reasonably for the level of risk taken. Additionally, the fund maintains a diverse portfolio spanning various sectors and industries, which can help it benefit from the broad economic growth.

Quant Flexi Cap Fund is suitable for investors with a high risk appetite looking for agile scheme in the Flexi Cap Fund category, provided they have a long-term investment horizon of at least 5-7 years.

Watch this video to check out the best Flexi Cap Funds for 2024:

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

We are on Telegram! Join thousands of like-minded investors and our editors right now.

DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

Disciplinary history

There are no outstanding litigations against the Company, its subsidiaries and its Directors.

Terms and condition on which its offer research report

For the terms and condition for research report click here.

Details of associates

• Group Companies including:

  1. Money Simplified Services Private Limited;

  2. PersonalFN Insurance Services India Private Limited;

  3. Equitymaster Agora Research Private Limited;

  4. Common Sense Living Private Limited;

  5. Quantum Advisors Private Limited;

  6. Quantum Asset Management Company Private Limited;

  7. HelpYourNGO.com India Private Limited;

  8. HelpYourNGO Foundation;

  9. Natural Streets for Performing Arts Foundation;

  10. Primary Real Estate Advisors Private Limited;

  11. HYNGO India Private Limited;

• Directors of the Company - Suresh Lulla; I V Subramaniam, Murali Ananthan Krishnan and Rafiq Dossani

1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

3. Neither QIS, it's Associates, Research Analyst or his/her relative have actual/beneficial ownership of one per cent or more securities of the subject Company, at the end of the month immediately preceding the date of publication of the research report;

4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

1. Neither QIS nor it's Associates have received any compensation from the subject Company in the past twelve months;

2. Neither QIS nor it's Associates have managed or co-managed public offering of securities for the subject Company;

3. Neither QIS nor it's Associates have received any compensation for investment banking or merchant banking or brokerage services from the subject Company;

4. Neither QIS nor it's Associates have received any compensation for products or services other than investment banking or merchant banking or brokerage services from the subject company in the past twelve months.

5. Neither QIS nor it's Associates have received any compensation or other benefits from the subject Company or third party in connection with the research report

1. The Research Analyst has not served as an officer, director or employee of the subject Company.

2. QIS or the Research Analyst has not been engaged in market making activity for the subject Company.

Click here to read PersonalFN's Mutual Fund Rating Methodology

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013

Investment in securities market are subject to market risks, read all scheme related documents carefully.