The month of September witnessed some historic
developments in the global financial markets. Fannie Mae
and Freddie Mac, the US home lenders were nationalized.
Lehman Brothers, the Wall Street broker, filed for
bankruptcy. AIG amongst the biggest insurer was given a
credit lifeline by the US federal reserve as the credit crisis
in the US intensified. Later in the month, even some UK
and European banks and housing companies showed signs
of distress, clearly indicating the effect of the crisis
spreading beyond US entities. The global inter-bank
markets are extremely tight in liquidity as evidenced in the
rising LIBOR rates.
The impact in India has been experienced through foreign
investors selling their equity holdings and repatriating
money back. The outflow of dollars resulted in a 7% fall in
the value of Rupee this month. The RBI has intervened by
buying rupees to curb volatility and check the pace of
depreciation. Since June they would have bought more
than Rs 50,000 cr effectively removing it out of the
banking system, thus creating inter-bank rupee liquidity
tightness.
The outflows on account of advance tax payments in the
second half of September added to the liquidity tightness.
The system was short of more than Rs 70,000 cr, which
resulted in call rates climbing to above 15% mark.
We had positioned our portfolio in early September for
this eventuality by holding sufficient cash levels and thus
benefited out of the higher overnight short term rates to
generate good returns. Short term rates on prime rated
banks and corporates crossed the 12% mark. The first
week of October would see some easing of liquidity due to
government spending. However, due to the higher
government borrowing program slated, we expect
liquidity to remain tight till November.
We don't expect the RBI to cut CRR or SLR in easing this
seasonal liquidity crunch. Any downward interest rate
action would be seen only after Inflation comes below the
targeted level of 7%,. We don't see inflation below 7% till
February/March and hence expect rates to remain
elevated for the next 2-3 months. Although we would
gradually look to extend our maturity levels by buying
assets at the current high rates in expectation of the rate
easing in 2009.
Statutory Information and Risk Factors: Investment Objective: QLTEF’s investment objective is to achieve long-term capital appreciation. QLF’s investment objective is to provide optimal returns with moderate levels of risk and high liquidity. QGF’s investment objective is to generate returns that are in line with the performance of gold, subject to tracking errors. The principal investment objective of Quantum Index Fund (QIF) is to invest in stocks of companies comprising the S & P CNX Nifty and endeavour to achieve a return equivalent to Nifty by “Passive” Investment. Asset Allocation: QLTEF will primarily invest in Equity and Equity related securities, but may invest in money market instruments to meet liquidity needs. QLF will invest in Money Market and other short term debt instruments having maximum repricing tenor of one year. QGF will primarily invest in physical gold and if allowed under SEBI Regulations, also in gold related securities, but may invest in money market instruments to meet liquidity needs. QIF will predominantly invest in stocks constituting the S & P CNX Nifty but may invest in money market instruments to meet liquidity needs. Terms of Issue: QLTEF is an open-ended Equity Scheme offering Growth and Dividend Plans. The units can be subscribed/redeemed at the applicable load, on all business days during the continuous offer. QLF is an open-ended Liquid Scheme offering Growth, Daily Dividend Re-investment and Monthly Dividend Payout Plans. The units can be subscribed /redeemed at the applicable NAV, subject to applicable load, on all business days during the continuous offer. QGF is an open-ended Exchange Traded Fund. Each unit of QGF will be approximately equal to the price of half (1/2) gram of Gold. Units will be issued at NAV based prices.On an ongoing basis direct purchases from the Fund would be restricted to only Authorised Participants and Eligible Investors. Direct purchase from the Fund by retail investors is not permitted. Units of QGF can be bought/sold like any other stock on the National Stock Exchange of India Ltd. (NSE) or on any other stock exchange where it is listed. QIF is an open- ended Exchange Traded Fund. Each unit of QIF will be approximately equal to 1/10th (one tenth) of the S& P CNX Nifty. Units will be issued at NAV based prices. On an ongoing basis direct purchases from the Fund would be restricted to only Authorised Participants and Eligible Investors. Direct purchase from the Fund by retail investors is not permitted. Units of QIF can be bought/sold like any other stock on the National Stock Exchange of India Ltd (NSE) or on any other stock exchanges where it is listed. Entry Load: Nil in case of QLTEF, QLF, QGF and QIF. Exit Load: in case of QLTEF : On redemption/switchout within 6 months of allotment- 4%, after 6 months but within 12 months- 3%, after 12 months but within 18 months-2%, after 18 months but within 24 months-1%, after 24 months-Nil. In case of QLF and QIF: Nil. In case of QGF: Nil in case of Authorised Participants; 0.5% in case of Eligible Investors. Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsors: Quantum Advisors Private Limited. (liability of Sponsor limited to Rs. 1,00,000/-) Trustee: Quantum Trustee Company Private Limited. Investment Manager: Quantum Asset Management Company Private Limited (AMC). The Sponsor, Trustee and the Investment Manager are incorporated under the Companies Act, 1956. Risk Factors: Investments in mutual funds are subject to market risks including uncertainty of dividend distributions and the NAV of the schemes may go up or down depending upon the factors and forces affecting the gold and securities markets and there is no assurance or guarantee that the objectives of the schemes will be achieved. The past performance of the Sponsor has no bearing on the expected performance of the scheme. Quantum Long-Term Equity Fund, Quantum Liquid Fund, Quantum Gold Fund and Quantum Index Fund are the names of the schemes and do not in any manner indicate either the quality of the Schemes, their future prospects or returns. Scheme specific risk: QLTEF, QLF, QGF and QIF are the first equity, liquid, gold and Index schemes being launched by the AMC. The AMC has no previous experience in managing equity, liquid, gold or index schemes. Equity and Equity related instruments are by nature volatile and prone to price fluctuations due to both macro and micro factors. QLF proposes to invest the portfolio in debt and money market instruments. The QGF’s NAV will react to the Gold price movements. The Investor may lose money over short or long period due to fluctuation in Scheme’s NAV in response to factors such as economic and political developments, changes in interest rates and perceived trends in bullion prices, market movement and over longer periods during market downturns. Trading volumes, settlement periods and transfer procedures may restrict the liquidity of these investments of the QLTEF, QLF, QGF and QIF. Please read the Offer Documents of QLTEF, QLF, QGF and QIF before investing. Offer Documents/Key Information Memorandum/Application Forms are available at the Quantum AMC Office at 107, Regent Chambers, Nariman Point, Mumbai-400021. It is to be distinctly understood that the permission given by NSE should not in any way be deemed or construed that the Offer Documents for QGF and QIF have been cleared or approved by NSE nor does it certify the correctness or completeness of any of the contents of the said Offer Documents. The investors are advised to refer to the Offer Documents of QGF and QIF for full text of the ‘Disclaimer Clause of NSE’. ”S& P” and Standard and Poor’s” are trademarks of the McGraw-hill Companies, Inc (S & P) and have licensed for use by India Services & Products Ltd in connection with the S& P Nifty Index. “ The Product is not sponsored, endorsed sold or promoted by India Index services & Products Limited (“IISL”) or Standard & Poor’s , a division of The McGraw –Hill Companies, Inc ( “S & P “) regarding the advisability of investing in securities generally or in the product. Please read the full Disclaimer in relation to the S& P CNX Nifty Index in the Offer Document/ Prospectus /information Statement of QIF”.
