- Date : 07/02/2023
- Read: 3 mins
Experts suggest investors should not exit from Quant Funds.
Quant Mutual Funds are freefalling compared to their category and benchmark for one week. Mutual Fund advisors say that the main reason is their exposure to the Adani Group. Several mutual funds had no investment in Adani Companies. Only the ETFs and index schemes had exposure to its stocks.
However, Quant had investments in the battered company as it follows the quant-based investment approach. It follows the VLRT framework. Adani stocks have been freefalling since the Hindenburg report accusing Adani of wrongdoings. Banks like Standard Chartered, Citigroup, and Credit Suisse have stopped taking Adani's overseas bonds for collateral.
We are witnessing a build-up in political pressure as the opposition is stalling the Parliament. These stocks stay under pressure as we are still unclear on how the saga will continue and what turn it will take. Quant Mutual Funds have lost more than their peers in the same group and benchmarks since the allegations. Hindenburg released its report on January 24, and the Quant Mutual Funds have been freefalling since then.
Prakala Wealth Management, Founder, Chokkalingam Palaniappan, said that the Quant Mutual Fund schemes are falling as they had invested in two stocks: Ambuja Cement and Adani Ports. While Ambuja Cements has not seen a major fall, SEZ and Adani Ports have fallen over 50%. It will impact these schemes consequently. He believes that the price fluctuation might be attributed to institutional investors exiting because retail investors exiting cannot drastically decrease the stock price. He believes Quant Mutual Funds might have exited as well. It had reduced exposure a few months back.
What Should You Do If You Are A Quant Investor?
You need not exit or panic if you are an investor in Quant Mutual Funds. You should wait and watch to see the outcome of the saga and continue with your SIPs. The prices and profits will automatically recover, says Palaniappan. He believes you should decide after around six months. While a 5% hit is possible, they can recover if the investors continue their investments.
Mutual Fund advisors believe the Quant Mutual Funds are for aggressive investors who are risk averse and have a horizon for the long term. Palaniappan says that you should stick to your decision and not quit when you make aggressive moves. Higher returns come with higher risk, and you must continue with your investment until you get the profits. He believes it is not wise to exit now.
Disclaimer: This article is intended for general information purposes only and should not be construed as investment or legal advice. You should separately obtain independent advice when making decisions in these areas.