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Posted On Friday, Apr 24, 2020
Investors of Quantum Mutual Fund and regular readers of Quantum's newsletters would be aware of our constant communication and recommendation over the last 18 months on avoiding risks in your fixed income investing.
Hence we recommend you read (or re-read ??) the 'Tenets of Debt Fund Investing' detailing why and how an investor should approach investing in debt funds with the foremost point being that 'Debt Funds are not Wealth Generating products'.
We had cautioned investors to not to take risks to try and earn that extra 0.5%-1.0% in their debt funds. Debt funds are only an alternative to other fixed income instruments and the priority should be to invest in debt funds or debt instruments, which keep your money safe and liquid.
We have also been highlighting on the important aspect of the investment objective of each scheme and whether the funds are being managed 'True to Label'.
We take this opportunity to assure our investors that due to our conservative stance (we will explain why further in this article) and our continued and unrelenting focus on the SLR principle of Safety, Liquidity and lastly Returns - your investments in Quantum Fixed Income funds are managed in a way to to keep your money safe and liquid.
The Quantum Liquid Fund thus states that 'Do not Invest in Liquid Fund for Returns; Invest in Liquid Funds to keep your money Safe and Liquid'.
As that is the objective of a liquid fund. To keep your money safe and liquid.
Quantum Liquid Fund (QLF) prioritizes safety and liquidity over returns and invests only in less than 91 day maturity instruments issued by Government Securities, treasury bills and top rated PSUs.
Similarly, every commentary on the Quantum Dynamic Bond Fund, because it takes higher market risks, warns the investors to have a 2-3 year view while investing in the fund and to be prepared at all times for short term periods where the returns from the Quantum Dynamic Bond Fund may even be negative.
Over the years as we have seen the risk taking in the bond markets increasing, we have gone the other way by continuously reducing the credit risks that the Quantum Liquid Fund and Quantum Dynamic Bond Fund can take.
The Quantum Liquid Fund and the Quantum Dynamic Bond Fund thus currently invests only in Government Securities, Treasury Bills and bonds issued by a select few AAA rated Public Sector Undertakings. Both the funds do not have any investments in bonds issued by private corporate sector.
The Quantum Liquid Fund and the Quantum Dynamic Bond Fund thus claim to have very low credit/default risk.
In our weekly commentaries and monthly commentaries, we have been consistently highlighting the continued stress in the bond markets and that despite all the actions by the Reserve Bank of India, some segments of the bond market remains risky for investors and presents a systemic risk to the industry as well.
With the onset of COVID-19 and its economic uncertainty, we believe that the sentiment in the bond market will turn adverse and that it may be prudent to be as risk averse as one can be in their investment portfolios.
Over the last 2 weeks, the portfolios of Quantum Liquid Fund and Quantum Dynamic Bond Fund have reduced their exposures even in AAA PSU instruments and both the funds now hold a very large proportion of the portfolio in Government Securities and Treasury Bills.
We believe that we will be holding this conservative stance for a long time as we do not expect things to stabilize anytime soon.
As we have guided earlier, the returns on the Quantum Liquid Fund, due to holding a higher level of cash and treasury bills will drift lower and investors should continue to expect the same.
The portfolio yield of the Quantum Dynamic Bond Fund will be lower due to a higher percentage of government securities but we believe that the government bonds are liquid and will be the biggest beneficiary of all the actions taken by the Reserve Bank of India. But do note that government bonds may not have credit risk but carry market risks and the fund's NAV may get impacted if and when market yields rise and the portfolio is not positioned for that.
We will re-iterate to all investors that these are not the times to try and earn 1-2% higher interest rate from your fixed income investments.
These are the times to be extra careful and cherish safety and liquidity.
|Name of the Scheme||This product is suitable for investors who are seeking*||Riskometer|
|Quantum Liquid Fund|
An Open Ended Liquid Scheme
|• Income over the short term |
•Investments in debt / money market instruments
Investors understand that their principal will be at Low risk
|Quantum Dynamic Bond Fund |
An Open Ended Dynamic Debt Scheme Investing Across Duration
|• Regular income over short to medium term and capital appreciation |
• Investment in Debt / Money Market Instruments / Government Securities
Investors understand that their principal will be at Moderate Risk
The views expressed here in this article / video are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. Quantum AMC / Quantum Mutual Fund is not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of this article should rely on information/data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments.
Mutual fund investments are subject to market risks read all scheme related documents carefully.
Please visit – www.QuantumMF.com to read scheme specific risk factors. Investors in the Scheme(s) are not being offered a guaranteed or assured rate of return and there can be no assurance that the schemes objective will be achieved and the NAV of the scheme(s) may go up and down depending upon the factors and forces affecting securities market. Investment in mutual fund units involves investment risk 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(s). 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. The Sponsor, Trustee and Investment Manager are incorporated under the Companies Act, 1956.
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