Mumbai: Quantum AMC announced here recently the launch of a “new fund offer” (NFO) with Quantum Small Cap Fund that opens for subscription on October 16 and closes on October 27, 2023.

The Fund – which is an open-ended equity scheme predominantly investing in Small Cap Stocks and will have a Direct and Regular Plan –will be co-managed by Chirag Mehta – Chief Investment Officer and Abhilasha Satale, Quantum AMC.

The scheme will be benchmarked against S&P BSE 250 Small Cap total return index (TRI) with its investment objective being generation of capital appreciation by investing in Small Cap Stocks.

The scheme will have a Direct and Regular Plan. The Fund managers will allocate 65%-100% to the equity and equity-related instruments of Small Cap Companies.

The Scheme Investment Philosophy features: True to Label Fund (Disciplined about fund capacity to prevent large size becoming a hindrance to performance); Prioritizing Liquidity  (Minimum Rs 2 Cr Average Value per day in all stocks); High-Conviction Portfolio: (comprising of 25 to 60 Stocks for optimal diversification to avoid becoming a “Closet” Small Cap Index); Agile Portfolio Construction (Track Record since 2006 of judiciously building portfolios); Ensuring Limited Ownership (General limit of 5% of market capitalisation holding in all stocks); Sizeable Stock Exposure (Minimum weight of 2% at cost in each stock).

“Our Small Cap Fund is meant for investors who are looking for long-term capital appreciation,” Chirag Mehta, Chief Investment Officer & Fund Manager, Quantum AMC, said. “We have seen that in the long term, Small Cap stocks have demonstrated the capability of giving good returns potential.”

He said “To ensure good returns for our customers, we will make investments in lesser-known, smaller businesses with growth prospects. Over a period of time, these companies increase their revenue and earnings, which can ensure good returns for our investors.”

“However, the biggest challenge in the small cap mutual fund space today is a large asset under management (AUM) size,” Mehta said while noting that funds with large AUM tend to face liquidity issues if they end up owning a big part of a small-cap stock’s market capitalization.”

“They may be compelled to have a long tail of stocks with unsubstantial weights or they may be forced to either sit on cash or to invest incremental inflows into mid or large-cap names, which is not what a small-cap fund’s objective is,” he said, adding that 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.

I. V. Subramaniam, MD & Group Head- Equities, Quantum Advisors – Sponsor to Quantum Mutual Fund, said, “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 eventually grow into sizable companies in the mid-cap or large-cap space.”

Noting that the growth of the economy will be led not only by the large companies but by the rapid growth of the many startups that have sprung up in the last few years, he said Quantum’s proven track record since 2006 demonstrated judicious portfolio management and adaptability to market conditions.

“Quantum Mutual Fund is well-positioned to enhance its investors portfolio with Quantum Small Cap Fund. This scheme aims to provide exposure to companies through a meticulously curated and diversified portfolio.”

“For this NFO, the Fund Managers will be disciplined about fund capacity and be mindful of large size becoming a hindrance to the fund performance. Liquidity will be prioritized and a high conviction portfolio with 25-60 stocks will be chosen for optimal diversification.”

“Quantum will have limited ownership in individual stocks, where generally holdings are capped at 5% of market capitalization. Furthermore, Quantum AMC also maintains a sizable stock exposure by ensuring a minimum weight of 2% at cost in each stock.”

“This approach minimizes concentration risk and fosters a balanced portfolio by offering a well-managed and diversified small-cap that aligns with the long-term financial goals,” he said.