The Quantum Long Term Equity Fund has topped the equity long-term growth category of the BT-Value Research Mutual Fund Rankings with a five-star rating and the lowest expense ratio among its peers, 1.25 per cent.
Atul Kumar, the fund manager, says the fund benefited in the past year from a rally in rate-sensitive stocks such as autos, as interest rates fell. It also benefited from investing in consumer goods stocks such as Hindustan Unilever and Tata Global Beverages.
The fund has outperformed many larger peers such as ICICI Prudential Focused Bluechip Fund and UTI Equity Fund, which manage assets in excess of Rs 2,000 crore. The fund has returned 13.4 per cent compound annual growth since its launch in February 2006. In comparison, the Bombay Stock Exchange's Sensex posted returns of 9.7 per cent during the same period.
Kumar attributes the fund's superior performance to the strong processes it follows irrespective of market movements. "We are sector- and market cap-agnostic," he says. The fund buys into companies that adhere to high corporate governance standards. It avoids companies that are highly leveraged or have aggressive business models. It holds 24 stocks in its portfolio and will limit the number to 40 stocks to avoid excessive diversification.
Kumar says banking stocks will benefit from a fall in interest rates as bad loans begin to moderate and banks start making some treasury gains. He likes software stocks as he expects offshoring volume to grow. In the auto sector, the fund is positive on Bajaj Auto because of its robust business and good cash flows.