Quantum Mutual Fund, known for its value investing approach, has recently launched its small-cap fund, marking its foray into the riskier segment of the market. Often under-researched and mispriced, small-cap stocks have the potential to generate alpha returns and generate wealth. This has led many leading asset management companies to delve into the small business space, and several funds have experience in wealth creation.
However, Quantum MF believes that the key to success in small-cap investing is prioritizing liquidity and commitment to the fund’s mandate. Many small-cap funds with large assets under management (AUM) can become over-diversified and face liquidity problems, which can negatively impact performance. Quantum Small Cap Fund aims to address these concerns by maintaining a high-conviction portfolio of quality small-cap companies, focusing on stocks with minimal average trading volume and limiting ownership to a certain percentage of market capitalization.
While small-cap stocks are generally associated with growth rather than value, Quantum MF’s value focus remains the same. The valuations of its portfolio of existing funds, Quantum Long Term Equity Value and Quantum Tax Saving, reflect this value drift. However, targeting the small business segment requires a bottom-up strategy that takes into account management practices and management decisions, making it difficult to adhere strictly to the principles of value investing.
Given the historical analysis that shows better returns from investing in small cap funds after a significant market decline, it may be prudent to wait until Quantum Small Cap Fund’s performance is more stable before considering an investment.
Sources:
– Quantum investment fund
– ACE MF
Definitions:
– Small-cap stocks: stocks of companies with a relatively small market capitalization that are often under-researched and mis-valued.
– Alpha returns: returns generated by the fund manager in excess of the benchmark index.
– Assets under management (AUM): the total market value of the assets managed by the investment company.
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2023-10-17 07:54:33
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