However, Quant Mutual Fund had investments in the Adani Group stocks as it follows a quant based investment strategy. Quant Mutual Fund follows the VLRT framework. (See table: Quant schemes and investments in Adani stocks)
Source: ACE MF, Data as on December 2022
Adani Group stocks have been in a freefall since the US-based short seller Hindenburg Research released a report alleging wrongdoings. Since then even some banks like Credit Suisse,Citigroup and Standard Chartered stopped taking its overseas bonds as collateral. Political pressure is also building up as the opposition has been stalling the parliament over the issue. The group stocks continue to be under pressure as it is still not clear how the scenario is going to unfold.
Quant schemes have lost more than their peers and benchmarks since the controversy started. The report was released on January 24. Since then most Quant Mutual Fund schemes have been falling (See Table: How much Quant schemes lost?)
Source:ACE MF, Returns as on February 3 2023“Yes, (Quant schemes are falling ) because they had investments in two stocks: Adani Ports and Ambuja Cement. Ambuja Cements has not fallen that much but Adani Ports and SEZ has fallen more than 50%. So automatically that will have an impact on these schemes,” says Chokkalingam Palaniappan, founder, Prakala Wealth Management.He says looking at the price fluctuation, it seems most institutional investors might have exited the socks as retail investors alone selling cannot bring down the price like this. So, it is possible that Quant also might have exited these stocks. Quant Mutual Fund had reduced its exposure a few months ago.
What should you do if you have investments in Quant Mutual Fund schemes? “Investors need not panic or need not exit now. Investors should wait and watch how things come up and continue with the SIP. It will recover automatically,” says Chokkalingam. He says investors can make a decision after six months. “A 5% hit in a normal fund is possible. In equity funds this hit is possible but the good thing is they can recover if the investor continues to hold the investment.”
Mutual fund advisors say Quant schemes are meant for aggressive investors who can take risk and have a long investment horizon. Chokkalingam says when you are making aggressive decisions you should stick to it rather than quit. “If you went for higher returns, then higher returns come with higher risk. So continue with that investment and they will recoup. It is not a wise decision to exit now from these schemes.,” he says.
