From Top Performer to Under Pressure: What happened to Quant Small Cap Fund?
- Gabriela Galeena
- 2 days ago
- 2 min read
Transcript from our recent video on Quant Small Cap Fund
The Quant Small Cap Fund, once a consistent top performer in its category, has recently experienced a significant drop in its rankings. While it remains the leader over a five-year horizon with a 27% return, it has been overtaken by competitors like Bandhan, ITI, and Invesco over a three-year period, and by newer funds like Trust MF over a one-year period.
The sources describe a major shift in the fund's management strategy that explains this change in performance:
High-Aggression Era (Pre-2021): Historically, Quant AMC followed an extremely aggressive "churn" strategy. The fund's Portfolio Turnover Ratio was 6.07 times, meaning they bought and sold stocks at a much faster rate than traditional funds like Nippon (0.49) or Kotak (0.19). In early 2020, for example, the fund completely replaced its top holdings within a single month to capture momentum in sectors like pharmaceuticals.
Strategy Shift (Post-2021): Around 2021, the fund began moving toward a more stable approach for its top holdings, specifically targeting Large Cap stocks. This was initially successful with ITC, where the fund realised a 127% gain.
The Reliance Impact: Following the success with ITC, the fund moved heavily into Reliance Industries, which became the highest holding (around 10%) across almost all Quant AMC funds. Although Reliance initially rose 58% after the fund's entry, it subsequently corrected by 29%, creating a major drag on the fund's overall performance.
Deviating Asset Allocation: The sources point out that the fund's current asset allocation differs sharply from industry standards for small-cap funds. While the average small-cap fund holds 7-8% in Large Caps, Quant Small Cap Fund now holds 25% in Large Caps. Conversely, it has reduced its exposure to actual small-cap stocks below the 84% category average.
Missed Opportunities and Poor Picks: The fund missed the recent major rally in PSU Banks and NBFCs because it had very little exposure to these sectors. Furthermore, large allocations in non-performing stocks like LIC and RBL Bank further hindered returns.
Despite these challenges, the analysis suggests that the current underperformance is more a result of market timing and specific stock cycles than a fundamental failure of the management team.
Disclaimer: This content is for educational purposes only; please conduct personal research and consult a qualified investment advisor before making any investment decisions.
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