Quant MF Releases Result Of First Stress, Liquidity Test
In a similar vein, the mutual fund disclosed that it would take six days and three days, respectively, to liquidate 50% and 25% of its midcap scheme portfolio.
Quant Mutual Fund has disclosed that it would take 22 days to liquidate 50% of the portfolio of its small-cap fund and 11 days to liquidate 25%, based on the Association of Mutual Funds in India’s prescribed methodology to test liquidity.
In a similar vein, the mutual fund disclosed that it would take six days and three days, respectively, to liquidate 50% and 25% of its midcap scheme portfolio.
The disclosure is the first of its kind on mid- and small-cap schemes, based on a notice sent by the industry body AMFI to mutual fund trustees at the behest of the Securities and Exchange Board of India. The disclosure, which also includes other details, such as the composition of the schemes’ portfolio, is meant to inform investors about potential risks.
AMFI stipulated the methodology for calculating the liquidity of a portfolio at the end of February.
“Holdings of large, mid, and small cap stocks and cash are 27.36%, 69.57%, 0% and 3.07%, respectively, in the quant Mid Cap Fund and 28.36%, 0.24%, 65.87% and 5.53%, respectively, in the quant Small Cap Fund," the fund house said in a letter to investors. "Top-10 investors hold only 2.99% in the quant Mid Cap Fund and only 2.10% in the quant Small Cap Fund."
To be sure, the constitution of the portfolio is as of the end of February and will have changed over the past two weeks.
The mutual fund also disclosed details of the valuation of its portfolio based on the combined trailing 12-month price-to-earnings multiple.
In its note, the mutual fund detailed its view of the prevailing trends in India’s equity market. “Our predictive analytics tools clearly endorse that there are no classic signs of euphoria in Indian equities at this point in time,” it said.
“The whole objective of this stress testing exercise of AMFI on behalf of the regulator is to make the average mutual fund investor aware of the risks and impact of market volatility on the liquidity of one’s equity portfolio, based on which one can take appropriate decisions to rebalance and redirect one’s liquidity and savings, as one deems fit,” the fund house said.
