Breaking the myth of size

Breaking the Myth of Size 27/05/2011 www.QuantumMF.com

Does size really matter? … Maybe it does – but surely not in mutual funds! 27/05/2011 www.QuantumMF.com

Breaking the Myth… Establishing Fact! 27/05/2011 www.QuantumMF.com

The Illusion of Size Illusion – There is safety in size! There is comfort in largeness! Let’s compare a small fund – Quantum Long Term Equity Fund – with the 5 largest funds at the time of its launch in March 2006 Size is irrelevant in the business of investment management Reality – 27/05/2011 www.QuantumMF.com

In March 2006 - when we launched the Quantum Long Term Equity Fund - the 5 largest equity fund schemes in the country at that time had a total of average assets under management (AAuM) of Rs. 17,008 crore put together ( AuM source: AMFI). So how did these 5 Large Funds perform? And how did the Quantum Long Term Equity Fund perform? Let the numbers speak… 27/05/2011 www.QuantumMF.com

There is more to life than size! Methodology Average of Large 5 Funds: Large 5 Funds average has been created considering the five open-ended diversified equity schemes which were the largest in terms of Average Assets Under Management (AAuM) as on March 13, 2006 as per the A UM data available on A MFI website. Compounded Annualized Returns for the large 5 Funds are calculated assuming that 20% of one’s capital was invested in each of the 5 largest funds, and averaged by taking into consideration NAV of growth option of the respective scheme from March 13, 2006 to April 29, 2011. Returns Since Inception are calculated with effect from March 13, 2006, which is the date of inception of the Quantum Long Term Equity Fund. 27/05/2011 www.QuantumMF.com

The above table is for illustrative purposes. All returns are Compounded Annualized Returns and are for the Growth Option of the funds. Past performance may or may not be sustained in future and may not necessarily provide a basis for comparison with other investments. Since Inception returns of QLTEF are calculated on NAV of Rs. 10 invested at inception. Performance as on April 29, 2011 27/05/2011 www.QuantumMF.com

Hence, Size does not hinder - or help – performance! The significantly larger size of money with the "5 largest" did not really translate into a "performance kicker" In the earlier chart, wouldn’t you say that the relatively smaller Quantum Long Term Equity Fund (the blue line) has done pretty well against the largest funds? 27/05/2011 www.QuantumMF.com

If you think ‘Big’ equals ‘Safe’… These examples should make you think again… UTI was big US-64 Scam CanBank Mutual Fund was big They went bust Satyam was big India’s own Enron scandal Lehman Brothers was big The cause of the 2008 crash Some of the largest mutual funds were those that did not assess the risks of Fixed Maturity Plans (FMPs), backed by real estate loans, and had to be bailed out by RBI during the Lehman crisis 27/05/2011 www.QuantumMF.com

Thus, Size is not a determinant of how an organization assesses risk, nor of it’s ability to control it! 27/05/2011 www.QuantumMF.com

Invest in a fund, not because of size, but because it matches your needs and your ability to take risks Remember! Size is not a determinant of performance! Invest in a fund that is focused on investment and research processes - and assessment of risks - not because it is large 27/05/2011 www.QuantumMF.com

27/05/2011

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Breaking the myth of size

by Quantum Mutual Fund on May 27, 2011

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