From a 5 star to a 4 star: Have we changed?

Posted On Sunday, Jan 01, 1950

As per Value Research’s fund rating for July 31, 2011, the Quantum Long Term Equity Fund moved from a 5 star to a 4 star

So what does this movement mean?
Nothing really! The investment thesis for us to own stocks in the Quantum Long Term Equity Fund continues to remain the same.

Markets may bounce. Share prices may jump all over the place. But the way stocks are researched and 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 their businesses the way they ran them last week - or last month. However, on some days, the stock markets love the share prices of certain companies. And on some days it loves some other stocks!

We believe, Ratings are - like the clouds - passing in nature.
We may not be a 5 star fund any longer but the way we manage your savings is still the same. The way we assess risk is still the same. And our risk category is still low even though we have moved from 5 stars to 4 stars (Quantum Long Term Equity Fund - in Equity Multicap Category (43 Schemes for 3 and 5 years period ending July 31, 2011. Past Performance is no guarantee of future results).

Ratings do not change what we do or how we do what we do. Ratings don't rattle us. We focus on assessing and pricing risk. And generating returns over longer periods of time.

We have avoided stocks where we felt that the risk-return reward was not attractive - or where the managements were totally avoidable. We focus on risk we wish to take and the return we wish to be rewarded for the risk we have agreed to take.

That is why you should never buy a fund merely for its ranking or rating – not even the Quantum Long Term Fund.

Sure, you should study the ranking and rating tables, too. But consider a lot more than these 2-minute noodle ranking / rating numbers before you take a call. For instance:

  • Check the consistency of the rankings and ratings - over different time periods, over different market conditions.

  • Understand the rationale of the buy and sell decisions that makes the fund manager deploy your savings into a stock.

  • Find out if there have been any changes in the investment management approach and how these changes reflected in the portfolio over time.

  • Understand the philosophy behind the founder or the Sponsor and why they have chosen this particular business.

Remember that the thought process and the research and investment rules that the fund management teams follow is far more important than the rank or the rating of the fund.

An informed investor understands risk. Surely, look at the returns of the fund – but never in isolation. Always consider the risks that the fund management took with your hard earned savings to generate those returns and then try to conclude whether the returns generated justified the risk taken. Refer to parameters like Sharpe Ratio and Volatility to ascertain the risk-return ratio of your specified fund.

To be a successful investor, you must make the effort to understand what you invest in and why you invest. No ranking or rating table will give you these answers.

The research team that looks after your savings in the Quantum Long Term Equity Fund is good - as is the process. However, the times are strange and volatile.

So, if you wish to double your money in a day - or are scared to invest in a Fund that is willing to take it on the chin once in a while for correctly assessing long term risks of buying certain stocks - then, please stay away from the Quantum Long Term Equity Fund.

But if you wish to make sensible long terms returns and plan to stay invested for more than 15 to 18 months - and don't get rattled by ratings and rankings - you could consider the Quantum Long Term Equity Fund. Click here to read about Morningstar’s report on the Quantum Long Term Equity Fund.

You may want to read more about our portfolio and learn about our Sharpe Ratio and Volatility – click here to view the latest factsheet.

Feel good about investing!

Team Quantum

Value Research Rating Methodology: Value Research Fund Ratings are a composite measure of historical risk-adjusted returns. In the case of equity and hybrid funds this rating is based on the weighted average monthly returns for the last 3 and 5-year periods. These ratings do not take into consideration any entry or exit load. Each category must have a minimum of 10 funds for it to be rated. Effective, July 2008, an additional qualifying criterion has been included, whereby a fund with less than RS. 5 crore of average AUM in the past six months will not be eligible for rating. Four-stars indicate that a fund is in the top 10% of its category in terms of historical risk-adjusted returns. 43 open-ended Equity Multi Cap Funds were rated as on July 31, 2011. The Value Research Ratings are published in Monthly Mutual Fund Performance Report and Mutual Fund Insight. The Ratings are subject to change every month. The Rating is based on primary data provided by respective funds; Value Research does not guarantee the accuracy.

Statutory Details and Risk Factors:

Quantum Long Term Equity Fund: An open ended equity scheme. Investment Objective: To achieve long-term capital appreciation by investing primarily in shares of companies that will typically be included in the BSE 200 index and are in a position to benefit from the anticipated growth and development of the Indian economy and its markets. Terms of issue: Units of the scheme can be subscribed /redeemed at the applicable NAV on all Business Days. Declaration of NAV on all Business Days. Entry Load: Not Applicable. Exit Load: On repurchase/redemption/switch out within 6 months from the date of allotment- 4%, after 6 months but within 12 months from the date of allotment- 3%, after 12 months but within 18 months from the date of allotment-2%, after 18 months but within 24 months from the date of allotment-1%, after 24 months from the date of allotment-Nil. Risk Factors: All Mutual Funds and securities investments are subject to market risks and there can be no assurance that the Scheme’s objective will be achieved and the NAV of the schemes may go up or down depending upon the factors and forces affecting securities markets. Quantum Long ¬Term Equity Fund is the name of the scheme and does not in any manner indicate either the quality of the Scheme, its future prospects or returns. Investors in the Scheme are not being offered a guaranteed or assured rate of return. Investment in mutual fund units involves investment risks such as trading volumes, settlement risk, liquidity risk, default risk including possible loss of capital. Past performance of the Sponsor / AMC/ Mutual Fund does not indicate the future performance of the Scheme. Statutory Details: Quantum Mutual Fund (the Fund) has been constituted as a Trust under the Indian Trusts Act, 1882. Sponsor: 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 Investment Manager are incorporated under the Companies Act, 1956. Please read the Scheme Information Document (SID) /Key Information Memorandum (KIM)/ Statement of Additional Information (SAI)/Addenda carefully before investing. SID / KIM / SAI can be obtained at the Investor Service Centers of AMC or office of AMC or on website /

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