Quant Small Cap Fund Review

Published: June 27, 2021 at 9:51 am

Last Updated on December 29, 2021

This week, we review Quant Small Cap Fund, which saw a 32844% increase in its AUM between March 2020 and May 2021! Almost all of its current AUM of Rs. 504 crore came during this period! The fund has delivered 178.5% returns in the last year, but what is baffling  is, the increase in AUM started months before

Readers may recall we reviewed Quant Active Fund last week. So this makes tracing the history of Quant Small Cap fund easier. Quant Capital acquired Escorts Mutual Funds in late 2017, and the change became official in early 2018.

In probably the most bizarre change in scheme attributed to falling in line with SEBI regulations, Quant Income Bond Fund (previously Escorts Income Bond Fund) became Quant Small Cap Fund! One can see this transformation in the NAV below.

Quant Small Cap Fund NAV showing the change from debt fund to small cap fund
Quant Small Cap Fund NAV showing the change from debt fund to small cap fund

Since its inception as a small cap fund, it has only beat the benchmark since July 2020. Before the March 2020 crash, the small cap segment was already heading south since late 2017. During this period, the fund was not able to beat the benchmark. Investors in this fund should keep this in mind as the tide in the small cap segment can change quite fast.

Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!

    🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
    Quant Small Cap Fund Vs Nifty Smallcap since Oct 22 2018
    Quant Small Cap Fund Vs Nifty Smallcap since Oct 22 2018

    At the very least, the fund must go through a few cycles of ups of downs in this volatile segment before it can be taken seriously.

    The asset allocation history of Quant Small cap fund is shown below. The fund seems to tactically increase bond or midcap/large cap exposure from time to time.

    Asset Allocation History of Quant Small Cap Fund
    Asset Allocation History of Quant Small Cap Fund

    The month-end AUM in Crores and the total expense ratio (TER) of the direct and regular plans are tabulated below. The spike in AUM started only in July 2020, at which point the fund had barely beat the benchmark as seen above. The AMC reduced the direct plan TER as an incentive to invite the AUM further.

    DateAUM CrTER Direct %TER Regular

    To an investor considering investing in this fund in Aug 2020, the trailing returns of this fund as of July 31st 2020, would have appeared like this.

    DurationQuant Small Cap Fund(G)-direct PlanNifty Smallcap 250 – TRI
    1 Year26.76-4.53
    3 Years0.55-10.61
    5 Years3.56-0.20

    Those indeed look impressive, but Quant Small Cap was only about 22 months old then (after the change in investment mandate).  The returns over longer durations are of little relevance. Since most investors do not bother to check, did they start investing based on such returns? Did some direct plan robo investment portal forget the fund’s history and rated it high based on 3Y or 5Y returns resulting in the higher AUM?

    As of July 31st, 2020, Quant Small Cap has the highest 1Y trailing return in the small cap category but not the highest 3Y or 5Y returns. Was this enough to impress the (young) direct plan investors?!

    For every month since then, the 1Y trailing returns of Quant Small Cap fund keep zooming up:

    • 46.5% in Aug 2020 (month end);
    • 52.7% in Sep 2020;
    • 50.7% in Oct 2020; By this time, the fund had the second-largest 3Y return (incorrectly!);
    • 61.6% by Nov 2020;
    • 76.1% by Dec 2020;  Now the fund became the topper in the 3Y return list again incorrectly!;
    • 60.9% by Jan 2021;
    • 86.5% by Feb 2021;
    • 177.25% by Mar 2021;
    • 174.97% by April 2021;
    • 208.1% by May 2021;
    • 178.5% by June 25th 2021; Topper in 3Y returns (incorrectly!) No 5 in 5Y returns (incorrectly!)

    Easy to see why the AUM keep flowing in. Please note, we are considering inflows and not an increase in existing AUM because of returns. See: These MFs gained the most in AUM after the 2020 market crash.

    The quarterly average Assets under management (AAUM)  (Rs in Lakhs) for Quant Small Cap reported at AMFI is tabulated below.

    QuarterRegular GrowthDirect GrowthDirect DividendRegular Dividend
    Oct-Dec 210826.7991.660.690
    Jan–Mar 201928.4189.4533.290.6
    Apr-Jun 201923.4387.21100.842.28
    July-Sep 201919.8166.79100.392.83
    Oct-Dec 201919.5865102.872.79
    Apr-Jun 202017.4552.28109.683.07
    July-Sep 202032.87863.181203.6482.72
    Oct-Dec 202087.552957.713650.89105.76
    Jan-Mar 2021139.036299.126363.07117.48

    The bulk of the AUM increase is in the direct plan. Is this a case of mistaken identity? That is, investors or analytical software ignoring the fund’s history and comparing its trailing returns when it was a bond fund with a small cap index? Are direct plan investors who fancy small cap fund so witless that they would just look at the last 1Y return of a fund and invest? We shall leave these questions for the reader to answer.

    In summary, we recommend that investors stay away from Quant Small Cap Fund or any of Quants offerings for that matter. They are too young and untested against market ups and downs. Regular readers may know our stand on small cap funds: Stay away from them or invest a small amount tactically, do no blindly start a SIP in these. See: Why a SIP in Small Cap Mutual Funds is a waste of money and time And: Do not use SIPs for Small Cap Mutual Funds: Try this instead!

    Do share this article with your friends using the buttons below.

    🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
    Use our Robo-advisory Excel Tool for a start-to-finish financial plan! More than 1000 investors and advisors use this!
    New Tool! => Track your mutual funds and stocks investments with this Google Sheet!
    • Follow us on Google News.
    • Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
    • Join our YouTube Community and explore more than 1000 videos!
    • Have a question? Subscribe to our newsletter with this form.
    • Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.

    Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!

      Explore the site! Search among our 2000+ articles for information and insight!

      About The Author

      Pattabiraman editor freefincalDr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.
      Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free!  One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
      Our new course!  Increase your income by getting people to pay for your skills! More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!   
      Our new book for kids: “Chinchu gets a superpower!” is now available!
      Both boy and girl version covers of Chinchu gets a superpower
      Both boy and girl version covers of Chinchu gets a superpower.
      Most investor problems can be traced to a lack of informed decision-making. We have all made bad decisions and money mistakes when we started earning and spent years undoing these mistakes. Why should our children go through the same pain? What is this book about? As parents, what would it be if we had to groom one ability in our children that is key not only to money management and investing but to any aspect of life? My answer: Sound Decision Making. So in this book, we meet Chinchu, who is about to turn 10. What he wants for his birthday and how his parents plan for it and teach him several key ideas of decision making and money management is the narrative. What readers say!
      Feedback from a young reader after reading Chinchu gets a Superpower (small version)
      Feedback from a young reader after reading Chinchu gets a Superpower!
      Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.
      Buy the book: Chinchu gets a superpower for your child!
      How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
      Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
      We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
      About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
      Connect with us on social media
      Our publications

      You Can Be Rich Too with Goal-Based Investing

      You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.
      Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.

      Your Ultimate Guide to Travel

      Travel-Training-Kit-Cover-new This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)