Why are investors ignoring a top flexi-cap of last 5 years?

Summary: This flexi-cap fund has topped the charts over the last five years, outpacing its benchmark by more than 5 per cent. Yet, its size has shrunk in the past 12 months. Why? Have investors simply overlooked the fund, or is there a deeper story? Let’s find out.

The Quant fund house has seen better days. And its flexi-cap fund is no different.

Once the poster child of India’s equity fund industry, the Quant Flexi Cap Fund is suddenly finding itself out of favour. The fall from grace has been swift. Between 2020 and 2024, the fund grew an astonishing 1,796 times in size, fuelled by a blistering performance streak where it delivered over 30 per cent annualised returns, comfortably topping its category.

But the tables have turned in the last 12-odd months. The fund’s size has shrunk, investors are heading for the exit, and its performance has slumped — down nearly 12 per cent in the last 12 months, making it one of the category’s worst performers this year.

So, what gives? Is Quant Flexi Cap’s success story over? Or is this just another bump in a longer road?

A short-term lens is dangerous

First, let’s address the obvious. One-year returns are a poor yardstick for evaluating equity mutual funds. If you judge an equity fund based on 12-month performance, you’re setting yourself up for disappointment. At Value Research, we’ve always emphasised that equity investing requires a five-year (at least) time horizon. Anything less, and you’re better off in hybrids or debt.

That’s because equity markets move in cycles, and funds that look weak in one year can often emerge stronger over a full market cycle that ranges between five and seven years.

Looking at the five-year performance

Over the last five years, despite the excruciating past 12 months, the regular plan of Quant Flexi Cap still holds the crown in its category and has comfortably beaten its benchmark (BSE 500 TRI):

• Quant Flexi Cap (five-year trailing return): 20 per cent
• BSE 500 TRI: 14.9 per cent

That’s a staggering outperformance, and one that very few active funds across any category can boast of.

But since trailing returns, while useful, only capture one snapshot, we decided to dig deeper.

So, we looked at rolling returns. Think of them like a cricket batting average. Looking at Virat Kohli’s score in one match tells you little about his calibre. But track his average across hundreds of innings, and you see his consistency.

Rolling returns work the same way. Instead of looking at one fixed five-year period, they calculate returns across many overlapping five-year stretches. This smooths out the noise and shows how consistently a fund has rewarded investors.

And here, too, Quant Flexi Cap stands tall. They are the fifth-best flexi-cap fund in the category, which suggests that this fund has consistently put up good numbers in the long run.

• Quant Flexi Cap (aggregate five-year rolling returns between September 8, 2015, and September 8, 2025): 21.5 per cent
• BSE 500 TRI: 14.2 per cent
• In fact, the Quant fund beat its benchmark, the BSE 500 TRI, two-thirds of the time over any five-year period in the last decade.

Even more impressive is how it has performed over any five-year period between 2015 and 2025:

• 21 per cent of the time: returns between 0–10 per cent
• 36 per cent of the time: returns between 10–20 per cent
• 30 per cent of the time: returns between 20–30 per cent
• 13 per cent of the time: returns over 30 per cent

That last figure is key. While its benchmark (BSE 500 TRI) has never delivered more than 30 per cent annualised returns over any five-year period in the last decade, Quant Flexi Cap managed it 13 per cent of the time.

To provide another context, this fund has delivered over 20 per cent returns more than four out of 10 times in the last decade.

That’s the magic that made investors flock to Quant.

But the cloud over Quant…

So, why the recent exodus? The reasons aren’t purely performance-related.

In June 2024, SEBI conducted search operations at Quant Mutual Fund over front-running allegations. Front-running is when someone with insider knowledge of upcoming trades uses that information to profit personally. For instance, if a fund manager knows their fund is about to buy a large chunk of stock X, they secretly buy it first, then sell after the fund’s large order pushes the price higher. It’s illegal and unethical, since it robs rightful gains from the fund’s investors.

The risk of such news is two-fold:

1. Redemption pressure — investors lose confidence and pull money out.
2. Stock pressure — if specific stocks are linked (even by rumour) to the trades, they may face selling pressure.

For Quant, this has been particularly damaging because many of its strategies lean on momentum plays. Momentum thrives on liquidity and inflows. Disruptions in either can derail the strategy, and that seems to be happening now, with Quant’s funds among the bottom five performers in their category this year.

Our take

Quant Flexi Cap’s long-term performance remains stellar. Few funds can match its ability to beat the market across cycles. But short-term pain, regulatory scrutiny and shaken confidence have led to outflows.

Should you panic? Not necessarily. But this episode is a timely reminder of two things:

1. Never stack all your bets on one fund house. No matter how dazzling a fund’s track record, avoid loading up on too many of its schemes. Just as you diversify across asset classes and categories, you need to diversify across fund houses too.
2. Stay disciplined. If you invested in Quant Flexi Cap with a five-year-plus horizon, judging it on one bad year could mean throwing away its long-term compounding edge.

Meanwhile, some other prominent fund houses have also faced frontrunning allegations in the past, yet have managed to regain investor trust over time. While such allegations are damaging for fund houses as they are managing hard-earned money of millions of investors, that doesn’t automatically rule out a comeback for Quant, going forward.

But are there any Quant funds in our ‘Buy’ list?

That’s where Value Research Fund Advisor comes in. It’s not just a list of top-rated funds; it’s a curated shortlist of funds we believe are worth your money today. Every recommendation factors in consistency, risk-adjusted returns, fund manager track record and how well the fund fits into a long-term portfolio.

Instead of drowning in dozens of choices, you get a clear, actionable set of funds to invest in.

Explore Fund Advisor Today

Also read: Ranking the 4 most consistent flexi-cap funds in India