Reliance Quant Plus Retail is extremely simple to understand. The fund focuses on the constituents of the Nifty, where there are 50 stocks. However, don’t mistake it for an index fund. This is a concentrated equity portfolio actively selected from a very limited universe. The equity component varies between 90-100 per cent of the portfolio, while the balance is in debt and money market instruments.
Since it’s a quant fund, it is not fund manager discretion that eventually leads to portfolio construction. The quant model shortlists around 15-20 stocks which belong to the Nifty. These stocks are thrown up by a mathematical model which looks at the four broad parameters of valuations (1-year Forward Earnings, Book Value, Price Earnings Growth), earnings (earnings momentum, growth, recommendation change), price (Relative Strength Index, price momentum, overbought, oversold) and quantity (Return on Equity, market capitalisation, liquidity, volatility).
The screening takes place at a pre-determined time, which is on a weekly basis. Since the universe is limited to just 50 stocks, this fund targets investors seeking capital appreciation and growth vis-à-vis the Nifty. Its basic aim is to outperform the Nifty in all market conditions. Going by this objective, it has certainly achieved its target.
The fund was originally launched as Reliance Index Fund on February 8, 2005. The key features of this fund along with its name were changed with effect from April 18, 2008.
In 2009 it barely managed to beat the Nifty. In 2010 it did a much better job. Even within its category it was a top-quartile performer. Its 1-year and 2-year returns put it ahead of the Nifty and category average while its current returns indicate that it has not fallen dramatically and again has outdone both. In its best 1-year period, it delivered almost 100 per cent (March 9, 2009 - March 11, 2010) and in its worst it fell by (-) 26.79 per cent (April 28, 2008 - March 28, 2009).
We have no grouse with this fund. However, its annual track record only spans bull runs. But in all fairness, if we look at its quarterly returns in 2008, it did fall less than the category average in the last two quarters of that calendar year: -1.87 per cent (category average: -2.92%) and -20.60 per cent (category average: -22.28%). This fund could be looked at by those investors who want to invest in the largest and best companies available without limiting themselves to an index fund.