When Ajit Dayal launched Quantum Mutual Fund (Quantum MF) in 2005, he chose to junk conventional practice. He did not chase assets under management (AUM), but instead focused sharply on performance and profitability. His most radical decision, however, was choosing not to sell his funds through distributors.
Instead, he built his own marketing and sales team. This was virtually unheard of then in the Indian mutual fund industry.
But Dayal, formerly chief investment officer with the first foreign mutual fund in India, Jardine Fleming, knew what he was doing. And his strategy has paid dividends so far - the Quantum fund earned a profit in its fourth year in 2009 and broke even by 2012 (See Rapid Progress). "Today we have investors in every state of India," says Jimmy Patel, CEO, Quantum MF. And this has been achieved at a time when most mutual fund companies are struggling to sell their products. Worst off are the small mutual funds, most of which are making losses.
One of Quantum's schemes has been particularly successful - the flagship Quantum Long-term Equity Fund (QLTEF), which recorded 35 per cent annual returns in the past three years compared with 12 per cent by the BSE Sensex. Quantum launched QLTEF in March 2006, with 25 employees, raising Rs 11 crore from 780 investors. Since then QLTEF's AUM has grown steadily - as on December 31, 2012, it stood at Rs 150 crore with an investor-base of 13,000 investors and 135 employees. For the last three years, it as been in the top quartile of the large-cap and mid-cap categories.
"The fund can be a good core holding of any investor's portfolio," says Dhirendra Kumar, CEO of mutual fund tracking firm, Valueresearch. The Quantum group operates three structures - the mutual fund, a portfolio management service and a Mauritius-based fund for foreign institutional investors (Quantum India Equity Fund). In all, the mutual fund business has eight schemes across asset classes such as equity, debt and gold. Managing equities, though, is its core competence.
No doubt, almost 90 per cent of Quantum MF's revenues still come from providing research to its FII fund which manages a corpus of $1.5 billion. But its own overall AUM has also been growing steadily, touching Rs 191 crore in March 2012. Industry experts claim that mutual funds need AUM of more than Rs 9,000 crore to break even, since the higher the AUM, the higher the revenue from operations, boosting profits. But here too, Quantum MF has bucked the trend.