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From 248 to 7 - in 5 days!
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Nov 2009
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Thankfully, we did not fire the Fund Manager!
And - my good fortune - the Board of Quantum Asset Management Company Private Limited did not fire me.
And - great judgement on your part - investors like you in the Quantum Long Term Equity Fund did not bail out and put their money in some other equity mutual fund
It is time to celebrate.
And maybe send a garland to the Fund Manager of Quantum Long Term Equity Fund.
The ranking of the Quantum Long Term Equity Fund (for a one week period) surged from 248 (out of 248 diversified equity funds) on October 21st to 7th (out of the same 248 diversified equity funds) on October 28th. (click here to read the previous HT)
Hmm, I thought, I know we did not change a lot in the portfolio.
Does your portfolio have a heart beat?
In fact, the Fund Manager informs me that we did not do a single trade.
Yes, you read that correctly: there was not a single trade done in those 5 working days.
In nearly 28 hours of trading, there were no trades done by the Fund.
Of course, the market was trading and was open.
Over Rs. 550,000 crore worth of trades were done in those 5 trading days.
And not one paisa from Quantum Long Term Equity Fund.
And our ranking for the week surged from 248 to 7.
Table 1: Quantum Long Term Equity Fund surges to a 7th rank for the past one week! | Returns (%) | 1 Week Ended October 28, 2009 | 1 Month Ended October 28, 2009 |
| Quantum Long Term Equity Fund | -2.11 | +0.06 |
| Category Average (Equity Diversified) | -4.45 | -1.08 |
| | | |
| Quantum Long Term Equity Fund Ranking | 7 | 69 |
| Total | 248 | 248 |
| How many funds have we done better than? | 97.18% | 72.18% |
(Source - www.valueresearchonline.com) Returns for Growth Plan But what caused this surge?
Again, someone's perception of the "correct" price of the stocks owned in the portfolio of the Quantum Long Term Equity Fund.
The fact that there were no trades done does not mean that the investment team was sleeping.
Far from it: they continue to monitor the companies and managements of businesses.
They have a pulse.
They have a heart beat.
Their decision to do nothing was a conscious decision.
Nothing significant had happened during that Rs 550,000 crore of hyper-active trading over that 5 day period.
Table 2: QLTEF stocks did better than some others this week! | The Top 10 stocks owned by the Fund | Their weight in the portfolio as of September 30, 2009 | How did they perform between Oct 22 and Oct 28? |
| HDFC | 6.20% | -0.9% |
| TCS | 5.93% | 1.4% |
| Infosys | 5.55% | 4.2% |
| HDFC Bank | 5.30% | -2.4% |
| Hind UniLever | 4.48% | 1.7% |
| ONGC | 4.40% | -3.8% |
| Bajaj Auto | 4.38% | -2.7% |
| Container Corp | 4.04% | -3.9% |
| Zee | 4.03% | -1.3% |
| BPCL | 4.01% | -4.7% |
| | | |
| BSE-30 Index | | -4.3% |
| | | |
| Reliance Ind | Not owned | -6.7% |
| ICICI | Not owned | -12.8% |
| L&T | Not owned | -5.1% |
| Unitech | Not owned | -18.0% |
| DLF | Not owned | -14.6% |
Source: Bloomberg, BSE
As we highlighted in the previous
Honest Truth for the week ended October 21st, the stocks we owned did not "rise" in price.
The stocks we did not own, did a lot better.
So, we suffered.
For that one week.
And now we have done better.
Much better.
A repeat lesson for all of us
The way stocks are researched for the portfolio of the Quantum Long Term Equity Fund has not changed.
The way stocks are picked for the portfolio of the Quantum Long Term Equity Fund has not changed.
But the way the markets price the stocks we own changes every minute!
The last time we checked, the managements of the companies we own still run the way they ran their businesses last week - or last month.
But, on some days, the stock markets love the share prices of certain companies.
And on some days it loves some other stocks!
This similar portfolio gave the Quantum Long Term Equity Fund a pretty good track record for the 1-year, 2-year, and 3-year time periods ended October 28, 2009.
Table 3: Read our Offer Document carefully to decide where to park your savings for the long term
| Quantum Long Term Equity Fund - Performance Data |
| Returns (%) | 3 Month Ended | 6 Month Ended | 1 Year Ended | 2 Year Ended | 3 Year Ended |
| Returns upto 1 year are absolute and over 1 year are annualised. | As on October 28, 2009 | |
| Quantum Long Term Equity Fund | 13.45 | 65.67 | 101.20 | 3.57 | 13.18 |
| Category Average (Equity Diversified) | 8.70 | 55.81 | 88.79 | -7.22 | 8.45 |
| Quantum Long Term Equity Fund Ranking | 28 | 49 | 47 | 10 | 33 |
| Total | 236 | 221 | 210 | 186 | 156 |
| How many funds have we done better than? | 88.14% | 77.83% | 77.62% | 94.62% | 78.85% |
| Quantum Long Term Equity Fund was launched in March 2006 |
Source: www.valueresearchonline.com
So, markets bounce.
Share prices jump all over the place.
But the investment thesis for us to own stocks in the Quantum Long Term Equity Fund has not changed.
The ranking numbers are - like the clouds - passing in nature.
Rankings do not change what we do.
Click Here to learn more about the 'Quantum way'.
I am delighted that the majority of you refused to give us the permission to fire our fund managers or the research analysts: they are really good people and very disciplined in what they do.
Rankings did not rattle you.
Just as it does not rattle the investment team at Quantum Mutual Fund.
Assessing and pricing risk does.
And generating returns over longer periods of time.
They avoided stocks like Reliance, ICICI, L&T, DLF, and Unitech because the risk-return reward was not attractive - or the managements are totally avoidable.
We let others boast about their rankings and their stars and "returns".
We focus on risk we wish to take and the return we wish to be rewarded for the risk we have agreed to take.
The Fund manager and their research team that looks after your savings in the Quantum Long Term Equity Fund is good - as is the process - the times are strange.
The waqt for the week ended October 28th was good for our rankings.
The next Rs 550,000 crore of trading may change our ranking again.
Who knows!
And my appeal to you remains: if you wish to make sensible long term returns - and don't get rattled by this 248/248 of the previous week or the 7/248 ranking for one week (just as we are not) - click here and start investing in Quantum Long Term Equity Fund.
Suggested allocation in Quantum Mutual Funds | Quantum Long Term Equity Fund | Quantum Gold Fund (NSE symbol: QGOLDHALF) | Quantum Liquid Fund |
| Why you should own it: | An investment for the future and an opportunity to profit from the long term economic growth in India | A hedge against a global financial crisis and an "insurance" for your portfolioA hedge against a global financial crisis and an "insurance" for your portfolio | Cash in hand for any emergency uses but should get better returns than a savings account in a bank |
| Suggested allocation | 80 % | 20% | Keep aside money to meet your expenses for 6 months to 2 years |
Disclaimer : Past performance may or may not be sustained in the future. Mutual Fund investments are subject to market risks, fluctuation in NAV's and uncertainty of dividend distributions. Please read offer documents of the relevant schemes carefully before making any investments. Click here for the detailed risk factors and statutory information"
Ajit Dayal, the author is a Director in Quantum Information Services Private Limited and Quantum Asset Management Company Private Limited. Views expressed in this article are entirely those of the author and may not be regarded as views of the Quantum Mutual Fund or Quantum Asset Management Company Private Limited or Quantum Information Services Private Limited.
Mutual Fund Investments are subject to market risks. Please read the offer documents of the respective schemes before making any investments
Note: This article was first carried on www.equitymaster.com