Quant Mutual Fund sees net equity outflow of Rs 1,398 crore or 1.5% of AUM after Sebi front-running probe

Sandeep Tandon's Quant Mutual Fund said in an investor interaction on June 26 that it has witnessed net equity outflows of Rs 1,398 crore since Sebi's front running probe on India's fastest growing fund house.

Earlier this week, Moneycontrol reported that market regulator Securities and Exchange Board of India has carried out a search and seizure operation on Quant Mutual Fund on grounds of suspected front-running.

Quant has total assets under management (AUM) estimated to be around Rs 90,000 crore across 21 mutual fund schemes. It runs the third-largest small-cap fund in the country with assets under management of Rs 20,000 crore.

This has raised concerns about the fund's midcap and smallcap holdings and its liquidity profile, as it may face higher redemptions than normal provisions.

Also read: Quant MF escapes panic redemption | Investment advisors are suggesting to stay invested in quant mutual fund schemes, and investors are adopting a wait and watch approach with regard to their investments.

On the call today, Sandeep Tandon, Founder and CIO of Quant Mutual Fund, tried to allay investors' concerns and said that the fund's portfolio is quite liquid. He said that in the last few months, the fund has moved from midcap to largecap and from illiquid to liquid strategy.

Tandon said there has been no “alarming redemption” in the last three days. Tandon's presentation noted that gross inflows still remain normal, but gross outflows have increased.

Also read: 14 stocks where Quant MF is the only mutual fund investor

Earlier this week, Fisdom Research said in a note that Quant MF has a strong SIP book, diversified assets managed by a large number of investors, and highly liquid large-cap stock holdings to provide protection against pressure on the fund.

The research firm advised long-term equity investors, including SIP/STP investors, to maintain existing investments.

Interestingly, while Quant MF made headlines for its unique selection of stocks that are not chosen by other asset managers, Fisdom said such holdings are not large enough to create any significant redemption pressure on the fund.

Quant's latest liquidity stress test showed that the fund house would need 28 days to liquidate 50 per cent of its small cap fund portfolio and 14 days to liquidate 25 per cent of the same. On Quant Mid Cap Fund, the target for liquidating 50 per cent and 5 days for 25 per cent of the portfolio has been set at 9 days. The fund house has 28 per cent of its portfolio in small cap funds with liquid large cap stocks and 27.4 per cent in mid cap funds.

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