per unit as on 24/04/2024

About The Fund

Small Cap stocks have the potential to create wealth as these are under-researched, generally often mis-priced, innovative, or niche businesses with a long growth runway and scope to increase market share. From the many Small Cap funds available today - the right Fund is one which prioritizes liquidity and does not stray from its mandate.


Quantum recognizes that Small Cap Funds with large AUM can become over-diversified and may face issues of illiquidity that can have a negative impact on performance. The Quantum Small Cap Fund is a high-conviction, adequately diversified portfolio of quality small cap companies, with a commitment that every investor of the Fund will get exposure to a portfolio that adheres to fund mandate. It is time to choose a Small Cap with a Big Difference.



5 Reasons to Invest in the Quantum Small Cap Fund
  • 1. True to Label Fund - Disciplined about fund capacity to prevent large size becoming a hindrance to performance

  • 2. Prioritizes Liquidity – Minimum Rs. 2CR Average Value per day in all stocks

  • 3. High-Conviction Portfolio – Of 25 to 60 Stocks for optimal diversification to avoid becoming a “Closet” Small Cap Index

  • 4. Agile Portfolio Construction – Track Record since 2006 of judiciously building portfolios

  • 5. Ensures Limited Ownership – General limit of 5% of market capitalisation holding in all stocks

Portfolio

Investment Approach

Bottom-up Stock Selection Process - Investors get best of bottom-up ideas with a risk control measurement for each sector.

~1080 stocks

ADDRESSABLE
UNIVERSE*

  • Market cap of Rs 400 cr to 24,950 cr & average volume above ~INR 2cr

  • Data as on February 29, 2024.

~450 stocks

PARAMETERS
BASED SCREENING

  • Screening of stocks based on potential for growth, good capital allocation, sustainable business model, high standards of corporate governance
  • Idea generation supported by external sources like independent research and broker reports etc.

~250 stocks

GARP BASED
SCREENING

  • Analysts study stocks in their sector, travel, prepare detailed 5 yr projections
  • Regular research meetings to review ideas & approve stocks for database
  • All stocks reviewed within 180 days

25 to 60 stocks

PORTFOLIO

  • Portfolio of stocks with broad exposure to various sectors
  • Trust the managements or founders
  • Reflects three broad themes: domestic consumption, exports & infrastructure development.

Fund Features


  • Investment Objective

    The Investment Objective of the Scheme to generate capital appreciation by investing predominantly in Small Cap Stocks. There is no assurance that the investment objective of the scheme will be achieved.

  • Benchmark

    S&P BSE 250 Small Cap TRI

  • Type of Scheme

    An Open-Ended Equity Scheme Predominantly Investing in Small Cap Stocks

  • Plans Available

    Direct Plan and Regular Plan with Growth option

  • Minimum Application Amount

    Lumpsum - 500 SIP - 100 (Daily) & 500 (Weekly, Fortnightly, Monthly & Quarterly)

Fund Managed By

  • Chirag Mehta
    CIO & Fund Manager
    Funds Managed:
    • Quantum Equity Fund of Funds
    • Quantum Multi Asset Fund of Funds
    • Quantum India ESG Equity Fund
    • Quantum Gold Savings Fund
    • Quantum Small Cap Fund
    Qualification:
    • CAIA (Chartered Alternative Investment Analyst), and Masters in Management Studies in Finance
    Performance details of other funds managed by him
  • Abhilasha Satale
    Associate Fund Manager
    Funds Managed:
    • Quantum Small Cap Fund
    • Abhilasha Satale has more than 16 years of experience in Indian Capital Markets as an Analyst and Senior Research Manager.
    Qualification:
    • Masters in Business Administration

How To Invest

Invest Online in 3 simple steps. Click here to Get Started and plan your Asset Allocation!

Product Label

  • Name of the Scheme & Tier I Benchmark

    Quantum Small Cap Fund


    (An Open Ended-Equity Scheme Predominantly Investing in Small Cap Stocks)


    Tier I Benchmark: S&P BSE 250 Small Cap TRI

  • This product is suitable for investors who are seeking*

    • Long term capital appreciation

    • Investment in Small Cap Stock
    • Risk-o-meter of Scheme

      Investors understand that their principal will be at Very High Risk.

    • Risk-o-meter of Tier-1 Benchmark

*Investors should consult their financial advisers if in doubt about whether the product is suitable for them.

Frequently Asked Questions

Small-Cap Funds are equity-oriented mutual funds that invest minimum 65% of its asset in Equity and Equity-related instruments of Small-Cap companies.
Small caps are companies ranking 251st onwards in terms of full market capitalisation.

Small Cap Stocks have the potential to create wealth and generate alpha over the long term as these are under-researched, generally often mis-priced, innovative, or niche businesses with a long growth runway and scope to increase market share. These stocks can offer investors exposure to emerging themes and sectors which may not be covered under large and mid-cap Companies.

There is a wide universe of 1000+ Small Cap Stocks and 24 Small Cap Funds -. Let’s understand the challenges the industry faces:


Overdiversification

Overdiversification: Many large Small Cap Funds in the industry have to increase the number of stocks in the portfolio to accommodate new inflows to avoid holding a large part of a stock’s market capitalization. This dilutes the portfolio’s return potential. There are 24 Small Cap Funds in existence currently with an average AUM of ~1.85 lakh crores as per data from AMFI as of Aug 31, 2023. Average number of stocks in their portfolio is 80 which translates to an average portfolio weight of 1.25% for each stock. Some of these funds become over diversified and in some cases, ‘closet’ indexes which beats the point of paying a fee for active management.


The Quantum Small Cap Fund holds a high-conviction, adequately diversified 25-60 stock portfolio with minimum weight of 2% at cost to each stock selected after a bottom-up approach with an average trading volume of Rs. 2cr per day and a market cap that ranges between Rs.400 to Rs. 24,523 crores.

~980 stocks

ADDRESSABLE
UNIVERSE*

    • Market cap of Rs 400 cr to 24,523 cr & average volume above ~INR 2cr

  • Data as on November 30, 2023.

~450 stocks

PARAMETERS
BASED SCREENING

  • Screening of stocks based on potential for growth, good capital allocation, sustainable business model, high standards of corporate governance
  • Idea generation supported by external sources like independent research and broker reports etc.

~250 stocks

GARP BASED
SCREENING

  • Analysts study stocks in their sector, travel, prepare detailed 5 yr projections
  • Regular research meetings to review ideas & approve stocks for database
  • All stocks reviewed within 180 days

25 to 60 stocks

PORTFOLIO

  • Portfolio of stocks with broad exposure to various sectors
  • Trust the managements or founders
  • Reflects three broad themes: domestic consumption, exports & infrastructure development.
Drifted from Investment Allocation:

Small Cap Funds with large AUMs are unable to invest the incremental flows into either new or existing small cap stocks due to lack of investable opportunities or a portfolio stock’s inability to absorb more capital without the fund landing upholding a large part of its market capitalization. The Fund Manager is forced to invest in Debt / Money Market Instruments or to invest new money into Mid or Large cap Companies. Investors should be aware that if this happens, past track record of the fund, which was generated by investing in small cap stocks, may or may not be achieved in future.


Illiquidity:

Since Small cap stocks have lower market capitalization, Small Cap Funds have a risk of liquidity which increases with the increase in AuMs of the Fund. Some illiquid portfolio stocks of existing Small Cap Funds can take anywhere between a few months to few years to exit. If a fund’s holding in a stock becomes a large part of its market capitalization, it may not be able to exit that stock in an optimal time and at an optimal price.

Small Cap Fund is suited for investors seeking exposure to emerging sectors and themes where Large & Mid Cap Companies are not present. Small Cap Fund is suited for investors with a long-term horizon, looking to earn risk adjusted returns, and do not mind taking very high risk. For this reason, the Small-Cap fund finds a place on the very higher end of the risk-return spectrum, just a notch above other actively managed equity funds from Quantum Mutual Fund (see graph below).


Quantum Small Cap Fund ranks higher in the risk-reward matrix signifying higher rewards for the very high-risk exposure.

The above chart is for illustration purpose only

Investors can consider allocating around 15-20% of their equity portfolio to a Small-cap Mutual Fund based on their goals and risk appetite. Adding a Small Cap Fund to one’s equity portfolio could potentially elevate the overall returns over the long term. As per the 12|20:80 Asset Allocation Strategy, Equity forms the largest building block of an investors portfolio occupying 80% of an investors portfolio while 20% should be allocated to the strategic diversifier – Gold. As an initial step, before one chooses to invest in a mutual fund, he/she should set aside 12 months of safe money in liquid fund as an emergency fund.

As any other equity mutual fund scheme, capital gains are taxed depending on the holding period. Short Term Capital Gain (STCG) refers to a holding period of less than 12 months and will be taxed at a flat rate of 15%. Long Term Capital gain exceeding Rs. 1 Lakh will be taxed at 10%.

The key advantages of Quantum small cap fund are:


1. True to Label Fund   - Disciplined about fund capacity to prevent large size becoming a hindrance to performance.

2. Prioritizes Liquidity - Minimum Rs. 2CR Average Value per day in all stocks

3. High-Conviction Portfolio - Of 25 to 60 Stocks for optimal diversification to avoid becoming a “Closet” Small Cap Index.

4. Agile Portfolio Construction - Track Record since 2006 of judiciously building portfolios.

5. Ensuring Limited Ownership - General limit of 5% of market capitalisation holding in all stocks.

6. Sizeable Stock Exposure -Minimum weight of 2% at cost in each stock .

Small Cap Funds like any other equity mutual fund should be invested for long term period.

Ask these questions before you invest in a Small Cap Fund:


1. Is the portfolio diversified enough without resorting to overdiversification?

One way to assess this is to evaluate the portfolio weights of each of the Small Cap Stocks in the Fund. If the majority of the portfolio has weights less than 1% it means that such Small Cap Fund is overdiversified and any favourable upside in a stock may not necessarily correspond to a meaningful rise in returns of the Fund.


2. Can the portfolio be liquidated easily?

Small Cap Stocks have average smaller market capitalizations less than 24,523 Crores and may face the risk of illiquidity more than the Large / Mid Cap Companies. Low liquidity leads to risks of higher impact cost on exit and sub-optimal portfolio.


3. Does the portfolio comprise of stocks with strong governance and management quality?

Smaller companies may have lower governance standards as these are likely to be companies with insufficient capital to attract best management talent. They may also face weaker oversight from external vendors. This is where Quantum Small Cap Fund can add value. Our integrity filter was introduced in 1991 at the Quantum group level. We would rather miss a short-term opportunity than risk your investment with a company of low integrity, irrespective of the weight of the stock in the benchmark index.


Some of the other parameters you can use to assess a small cap fund are:

✔ Portfolio characteristics (the top-10 holdings, top-5 sector exposure, portfolio concentration or diversification, the market capitalisation bias, the style of investing followed, portfolio turnover, etc.)


✔ Whether there is a portfolio overlap of the Small-cap Fund with another scheme


✔ The quality of the fund management team, the experience of the fund manager, and the experience of the research team

The common risks associated with Small Cap Funds are:


• Liquidity - Small-cap l Fund may face liquidity risks. This means that the time taken for entering or exiting a position may be higher than anticipated.

• Governance – Small Cap Fund sometimes invest in emerging companies that may not have enough capital to attract and retain best management talent.

• Volatility – In the short term, Small Cap Funds could see sharp fluctuations. Investor should invest in Small Cap Fund for long term to avoid short term volatility.

• High Valuations – Some of the stocks may be overvalued and investing in them could cause higher downside risks.

There are many small-cap funds to choose from, and they may have different strategies. Investors should research about different small cap funds to select the ones that align with their investment goals. Quantum Small Cap Fund is a fund that adheres to fund mandate by being disciplined about fund size, portfolio liquidity and adequate diversification.


To invest in this fund, you can simply login to Quantum Mutual Fund website with your user id or PAN, provided you are already KYC compliant:


If you are not KYC compliant, please follow the steps as below,


Step 1: Log in to the Quantum Mutual Fund website and enter your details for KYC

Step 2: Complete the eKYC. Upload your documents like your PAN or ID proof.

Step 3: Invest in the Quantum Small-cap Fund as part of a diversified equity portfolio among other curated investment solutions.

Step 4: You can consider setting up a systematic investment plan, which allows you to invest a fixed amount of money at regular intervals, such as monthly.


You can also invest through multiple channels including:
• Mutual fund distributors
• Online mutual fund advisor or investor aggregator platforms

While the broader Indian stock markets are on a high, it's worth noting that there are pockets of opportunity within the small-cap space.


Graphs: Valuations and Smallcap Index-to-Sensex Ratio

Data of Sept 30, 2023


As of November 30, 2023, the P/E ratio of the S&P BSE 250 Small-cap index is trading below its long-term average. Moreover, certain small-cap companies are trading at even lower valuations compared to some of their large-cap counterparts. This situation indicates the potential for a rerating and upward price adjustment in these undervalued smaller companies.


However, it is essential to adopt a cautious strategy. Amid the numerous Small Cap Funds available, it is crucial to choose a Small Cap Fund that adheres to a robust investment methodology and places emphasis on growth at reasonable valuations to capitalize on the opportunities in this space.

Quantum Small Cap Fund Video

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