After facing a rough patch, value-oriented mutual funds have seen an improvement in their returns this year. And it seems that fund houses are seizing this opportunity by filling the gap in their product basket. The latest entrant to the open-end value-oriented-fund category is Quant Value Fund, being launched by Quant Mutual Fund. This is to mention that since December last year, the category has already witnessed the launch of four new funds.
The subscription to the new fund offer (NFO) of Quant is open till November 24, 2021.
About the strategy
In the world of mutual funds, value-oriented schemes follow the 'value-investment' strategy that primarily focuses on investing in the stocks that are available at a discount or more specifically, at a price that is less than their intrinsic value. Financial ratios like price-to-earnings (P/E) and price-to-book (P/B) value are often used to identify such stocks. The lower the ratios, the higher is the discount.
However, the fund house believes that when it comes to calculating the intrinsic value, more insights into the company and industry economics are required, which cannot be deciphered through simple financial ratios. And therefore, it would be using a VLRT framework - its in-house predictive-analytics tool - to study the market across four dimensions, including valuation, liquidity, risk appetite and time.
The fund managers' interpretation of the analytics tool, along with their views on macroeconomic factors, would be used to build the portfolio. The fund would dynamically switch between an aggressive and a defensive stance, depending on the overall risk-tolerance environment.
As per Value Research categorisation, there are about 22 schemes in the 'value-oriented' category, collectively managing close to Rs 77,000 crore of investors' money. Although value-oriented funds initially beat their flexi-caps peers, their returns converged in late 2019. Thereafter, value-oriented funds started underperforming. But the gap has now reduced as the returns of these funds have improved.
The fund house usually follows the multi-manager approach and this fund, too, would be managed by Sandeep Tandon, Ankit A Pande, Vasav Sahgal and Sanjeev Sharma. Tandon is the founder and chief investment officer (CIO) of the Quant group. He also co-manages Quant Quantamental Fund. Pande and Sahgal focus on the 'valuation' analytics. While Sahgal co-manages only its ESG Fund, Pande simultaneously contributes to all the equity funds of the asset management company. Mr Sharma usually looks at the debt analytics. Here is how equity funds of Quant Mutual Fund are performing.
About the AMC
Quant Mutual Fund collectively manages a little more than Rs 4,200 crore of investors' money across 14 open-end schemes. Based on the total assets under management (AUM), it ranks 30 among other fund houses.
Unlike the debt and hybrids spaces, the fund house has more funds in the equity space. Of its total AUM, 84 per cent belongs to equity funds across 11 schemes. Here are Value Research's star ratings on the AMC's open-end equity funds.