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Quantum Long Term Equity Value Fund (QLTEVF) is an open ended value oriented diversified equity fund. The fund has completed over 14 years since its inception in 2006 and is a product of strong research and investment process. Know more about the macro trends that impact equity valuations and parameters involved in selection of stocks that make up the QLTEVF portfolio.
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Quantum Long Term Equity Value Fund • February 2021 • Private &Confidential • Panel Discussion on Asset Classes of Equity, Debt & Gold • Speakers: • Sorbh Gupta – Fund Manager, Equity • Chirag Mehta – Sr. Fund Manager, Alternative Investments • December 17, 2020
4 Group Update – The Past 25 Years • Set the foundation for building an India-focused investment management institution across the 4 major asset classes: equity, fixed income, real estate, infrastructure: Steady growth in assets, disciplined approach attracting clients • Need for multiple asset classes to reduce the business risk of being dependent on any ONE product: • India is not mainstream - huge volatility in valuations and client interest • 1990 to 2004: investment processes refined by affiliation with international groups • 2004 to 2008: invested in people • 2004 to 2008: incubated teams to diversify business risk • 2008 to 2009: invested in world-class systems • 2010 onwards: maintaining our focus and discipline; succession planning
Our Journey so Far • Quantum Gold Savings Fund • India’s first fully paperless Online Investing Platform • Quantum Gold Fung • Quantum Nifty ETF • Quantum Tax Saving Fund • Quantum Dynamic Bond Fund • Transactions through Email, WhatsApp & Fax • Launch of Regular Plans • Set up Quantum AMC 2005 2006 2008 2009 2011 2012 2015 2016 2017 2019 • Quantum Long Term Equity Value Fund • Quantum Liquid Fund • Quantum Equity Fund of Funds • “Path to Profit” Launched • Quantum Multi Asset Fund of Funds • Quantum Long Term Equity Fund completes 10-year track record • Quantum India ESG Equity Fund
6 About our Sponsor– Quantum Advisors Pvt. Ltd. • Currently managing an AUM of USD 2.76 Billion (~INR 20,292 crore) as February 28, 2021 • Manages Indian equity investments for some of the largest institutions in the world, including Sovereign Wealth Funds, pension funds, endowments, and foundations • Currently registered as a Portfolio Manager with SEBI and other international regulators • Quantum Advisors is 50.8% owned by Mr. Dayal and the Management Team and 49.2% owned by HWIC Asia. HWIC Asia is ultimately promoted and wholly owned by Fairfax Financial Holdings Limited (“FFHL”). FFHL is listed on the Toronto Stock Exchange and is led by Mr PremWatsa, known as the Warren Buffet of Canada
ABOUT QUANTUM MUTUAL FUND
8 About Quantum Mutual Fund • Quantum Mutual fund was established in 2006 with the launch of the Quantum Long Term Equity Value Fund • Quantum Mutual Fund was the 29th, but India’s 1st Fund house that started with a focus on a Low Cost Approach for investors • Simple range of funds: No confusion for investors • Disciplined Research and Investment Process: Team-driven, no “star” fund managers • Staying the course, no short cuts: Asset Managers, not Asset Gatherers • Quantum MF AUM = Rs.1,978.61 Cr. as on 28th February 2021 • Number of Folios: 70,886 as on 28th February 2021
Company Structure 100% subsidiary of QAS
10 Always Putting Investors First, Even Above our Growth in AUM
Stock Markets Offer Real Opportunities • Market cap: USD 2,574bn • 4,000+ listed companies • 314 companies market cap > USD 1 bn • 886 companies market cap > USD 100 mn • Daily trading volume USD 8.84 billion/day for the period Mar 2020– Feb 2021 • 420 companies with daily avg traded > USD 1 mn • 304 companies with daily avg traded > USD 2 mn • Represents many “real” industries: not only financial services and property stocks • Equity culture – Bombay Stock Exchange over 130 years – oldest in Asia • Newer electronic NSE is the 3rd largest stockexchange in the world by volume Source: Quantum AMC, Bloomberg, SEBI and Tata Services Ltd As of Dec 31st,2020
Our Macro Assumptions The 4 inputs to our bottom-up stock selection process Source: Quantum AMC estimates, as of February 2021
Value Investing– Quantum Mutual Fund • We follow the Value investing strategy that involves buying companies at discounts to their long-term intrinsic value • We focus on the long term potential of the business • We normalize our assumptions - we do not value the companies on the basis of peak or trough margins • While valuing the company, we would generally give a 40% discount to its intrinsic value to set our buy limits • Typical characteristics of the portfolio following Value Investing strategy: • Low price to earnings ratio • Low price to book ratio • Low price to sales multiple • Low price to cash flow • High dividend yield
Quantum’s Bottom-Up Stock Selection Process Clients get best of bottom-up ideas with a risk control measurement for each sector Generally, < 20% of the stocks we cover meet our “Buy” criteria 25 to 40 stocks PORTFOLIO Portfolio of stocks with broad exposure to various sectors. Approved by the portfolio team Reflects three broad themes: domestic consumption, exports and infrastructure 201 stocks VALUE AND INTEGRITY SCREENING Analysts study stocks in their sector (India) with global comparison, travel worldwide, prepare detailed projections. Regular research meetings to review ideas and approve stocks for the database. Consensus required. All stocks are reviewed time to time generally within 180 days. We must trust the managements/founders ADDRESSABLE UNIVERSE Number of companies trading over US $1 million/day 327 stocks Number of stocks mentioned are as per current average trading volume value criteria. The number of Stock in trading volume criteria, and in portfolio will be changed from time to time based on Investment Strategy of the scheme.
Portfolio Construction • Stock under active coverage? • Volume INR 6.98 Crs per day No To research team YES Part of S&P BSE-30 Index? No effect on decision No Below Buy limit? Wait YES What sector? • Weights assigned to a stock • are a function of: • Reliability of management • Quality of earnings • Stability of earnings • Upside Potential • Alternatives/Cash Indifferent; guided by Research Investment Rules • Minimum wt 2% at cost • Maximum wt 6% at cost • Maximum wt 10% at market value Our portfolio turnover is typically 20%, suggesting a 5 year holding period. Please refer Scheme Information Document of the Scheme for complete Investment Strategy
A Tale Of Two Stocks – Since 1991 (2) Illiquid stocks give managers the fees – investors get nothing (1) We buy liquid shares of good businesses Source: Bloomberg Finance L.P., As of February 28, 2021 Disclaimer : The stocks discussed herein are for information purpose only. This is not a recommendation to buy or sell any security.
Myth #1- “India will grow 8% P.A” If the world slips sideways, India will grow...as it has over the past 39 year We believe 6.5% Real GDP growth is a realistic long term assumption Source: RBI and www.parliamentofindia.nic.in as of June 2019. Note: The number in red rectangle is from a changed data series starting Jan 2015. While a “superior” series, there is no comparable number to equate the “New” with the “Old”. Most economists deduct 0% to 1.5% from the “New” to equate to the “Old”; therefore under Modi, the GDP has been at 5.9% at best matching the 5.6% under the BJP-led coalition government of Vajpayee that resulted in a rout for the BJP at the time of the next election in 2004!* Please note that data used for World GDP for 2017 is a median Estimate since World Bank data is not yet available and India GDP data is governments second advance estimate released at the end of May.
Myth #2 – Make in India will Boost Exports Source: Quantum AMC, Google Images, Bloomberg Finance L.P.
Indians Still Consuming: The Hungry Consumers! 2021 YTD data: Two-wheeler sales data as on Jan '21, Passenger Vehicle sales data as on Jan ’21, Refrigerator data as on Dec ’20, Cement sales data as on Jan' 21, Housing loans data as on Jan 2021, Source: 2 wheelers, Cement & passenger vehicle – CMIE database; refrigerator production data – CMIE (IIP) database; home loans outstanding – RBI Data on Sectoral deployment of Bank credit (January 2021). ** Annualized Returns
India – Linked to Global Capital Flows, Not GDP Lower global links Source: World Bank database Updated as of February 28, 2021
Quantum Long Term Equity Value Fund – Must have equity diversified fund
Performance across the market cycles - (Mar 2006 – Feb 2021) Past performance may or may not be sustained in future. This graph should be reviewed in conjunction with detailed performance of the scheme provided on slide number32Source:Bloomberg
Performance of Quantum Long Term Equity Value Fund – Direct Plan – Growth Option The Scheme is co-managed by Mr. Sorbh Gupta and Mr. Nilesh Shetty. Mr. Sorbh Gupta is the Fund Manager effective from December 1, 2020. Mr. Nilesh Shetty is the Fund Manager effective from March 28, 2011. • Past performance may or may not be sustained in the future. Load is not taken into consideration in scheme returns calculation. Data as of 26th February 2021 • Different Plans shall have different expense structure. Returns are calculated on the basis of Compounded Annualized Growth Rate (CAGR). • *with effect from February 01,2020 benchmark has been changed from S&P Sensex TRI to S&P BSE 200 TRI. As TRI data is not available since inception of the scheme, benchmark performance is calculated using composite CAGR S&P BSE 200 index PRI Value from March 13, 2006 to July 31, 2006 and TRI Value since August 1, 2006 • For performance of other Schemes Managed by Mr. Sorbh Gupta please see slide number 42 and for performance of other Schemes Managed by Mr. Nilesh Shetty please see slide 42
SIP Performance - Direct Plan Growth Option • Data as of 26th February 2021 • Past performance may or may not be sustained in the future. Load is not taken into consideration using applicable NAV on the SIP day (5th of every month). Return on SIP and Benchmark are annualized and compounded investment return for cash flows resulting out of uniform and regular monthly subscriptions as on 5th day of every month (in case 5th is a non-Business Day, then the next Business Day) and have been worked out using the Excel spreadsheet function known as XIRR. XIRR calculates the internal rate of return for series of cash flow. Assuming Rs 10,000 invested every month on 5th day of every month (in case 5th is a non-Business Day, then the next Business Day), the 1 year, 3 years, 5 years, 7 years, 10 years and since inception returns from SIP are annualized and compounded investment return computed on the assumption that SIP installments were received across the time periods from the start date of SIP from the end of the relevant period viz. 1 year, 3 years, 5 years, 7 years, 10 years and since Inception. *XIRR - XIRR calculates the internal rate of return to measure and compare the profitability of series of investments. #Benchmark Returns. @Additional Benchmark Returns.
Performance of Quantum Long Term Equity Value Fund – Regular Plan – Growth Option The Scheme is co-managed by Mr. Sorbh Gupta and Mr. Nilesh Shetty. Mr. Sorbh Gupta is the Fund Manager effective from December 1, 2020. Mr. Nilesh Shetty is the Fund Manager effective from March 28, 2011. • Past performance may or may not be sustained in the future. Load is not taken into consideration in scheme returns calculation. Data as of 26th February 2021 • Different Plans shall have different expense structure. • Returns are calculated on the basis of Compounded Annualized Growth Rate (CAGR). • *with effect from February 01,2020 benchmark has been changed from S&P Sensex TRI to S&P BSE 200 TRI. As TRI data is not available since inception of the scheme, benchmark performance is calculated using composite CAGR S&P BSE 200 index PRI Value from March 13, 2006 to July 31, 2006 and TRI Value since August 1, 2006 • For performance of other Schemes Managed by Mr. Sorbh Gupta please see slide number 42 and for performance of other Schemes Managed by Mr. Nilesh Shetty please see slide 42
QLTEVF Monthly Cash Weight - Move To Cash When There Is No Value And Wait Patiently Source: Quantum AMC. As of Feb 28, 2021
While Avoiding The “Illiquidity Trap” Is Critical To Our Investment Process, We Are Not Shy Of Owning Small Caps . The number of stocks in portfolio will be changed from time to time based on Investment Strategy of the Scheme.
Divergent Portfolio - Not the Index for Sure! Even though we focus on buying liquid stocks, we do not necessarily buy Index stocks Source: Quantum Asset Management Company Pvt Ltd and Asia Index Pvt Ltd As of February 26, 2021 Stocks referred above are for illustrative purpose only and not recommendation of Quantum Mutual Fund / AMC. The Fund may or may not have any present or future positions in these stocks. The above information should not be constructed as research Report or recommendation to buy or sell of any stocks.
Portfolio Top 5 Holdings – Different Weights Source: Quantum Asset Management Company Pvt Ltd and Asia Index Pvt Ltd As of Feb 26, 2021 Stocks referred above are for illustrative purpose only and not recommendation of Quantum Mutual Fund / AMC. The Fund may or may not have any present or future positions in these stocks. The above information should not be constructed as research Report or recommendation to buy or sell of any stocks.
Sector Exposure of Our Bottom-Up Stock Picking Process Note: Past Performance may or may not be sustained in future. Source: MSCI, Quantum AMC | As of Feb 28, 2021 Sectors referred above are for illustrative purpose only and not recommendation of Quantum Mutual Fund / AMC. The Fund may or may not have any present or future positions in these sectors. The above information should not be constructed as research Report or recommendation to buy or sell of any sectors / stocks.
Portfolio Top 10 Holdings Source:Quantum Asset Management Company Pvt Ltd As of Feb 28 , 2021 Stocks referred above are for illustrative purpose only and not recommendation of Quantum Mutual Fund / AMC. The Fund may or may not have any present or future positions in these stocks. The above information should not be constructed as research Report or recommendation to buy or sell of any stocks.
Stocks we Own are Liquid Based on average daily volume of portfolio stocks for the last one year and Quantum’s trading share of 33%. The number of stocks in portfolio will be changed from time to time based on Investment Strategy of the Scheme.
Other Schemes managed by Sorbh Gupta and Nilesh Shetty Quantum Tax Saving Fund Mr. Sorbh Gupta is the Fund Manager effective from October 1, 2016. Past performance may or may not be sustained in the future. Data as of 26th February , 2021 #Benchmark returns. With effect from February 01,2020 benchmark has been changed from S&P Sensex TRI to S&P BSE 200 TRI. Returns are net of total expenses and are calculated on the basis of Compounded Annualized Growth Rate (CAGR). Different Plans shall have different expense structure. Mr. Sorbh Gupta co-manages 2 scheme of the Quantum Mutual Fund. Quantum Multi Asset Fund of Funds Mr. Chirag Mehta and Mr. Nilesh Shettyare Fund Managers effective from July 11, 2012. Past performance may or may not be sustained in the future. Load is not taken into consideration in Scheme Return Calculation. Data as of 26th February , 2021 # Indicates CRISIL Composite Bond Fund Index (40%) + S&P BSE SENSEX Total Return Index (40%) + Domestic price of Gold (20%).It is a customized index and it is rebalanced daily Returns are net of total expenses and are calculated on the basis of Compounded Annualized Growth Rate (CAGR). Different Plans shall have different expense structure. Mr. Chirag Mehta manages 5 schemes of the Quantum Mutual Fund. Mr. Nilesh Shetty manages 2 schemes of the Quantum Mutual Fund.
44 Impact/Risk Analysis on The Portfolio – A Top-down View for Presentation Purposes Note: Companies where bulk of the sales come from India are classified under Local Opportunity Companies where 25% or more, sales come from outside India are classified under Global Opportunity Companies which have their pricing determined by government policies are classified under Regulatory/Tariff The number of stocks in portfolio will be changed from time to time based on Investment Strategy of the Scheme.
Indian Private /MNC/ Government The number of stocks in portfolio will be changed from time to time based on Investment Strategy of the Scheme.
The Portfolio Relative To The S&P BSE-30 Index • Source: Quantum Asset Management Company Pvt Ltd; As of February 26, 2021 | cash weight excluded | ** S&P BSE-30 Index weight is based on free-float. % S&P BSE 30 Index column depicts the Fund fundamentals as a percentage of S&P BSE 30 Index fundamentals. The figures mentioned in WTD PER, WTD EPS and PEG ratio are calculated on the basis of Bloomberg consensus estimates for companies owned by the Fund as well as the companies in the S&P BSE 30 as of the reporting date i.e. February 26, 2021 .
47 Summary: A significant allocation to public equities using a disciplined, long-term, bottom-up, value-driven research and investment process for investing in the evolving Indian stock markets • Overall, economic policy is geared towards growth • India is a party to global trade and tariff agreements • Political “risk” exists – but effect is more on specific sector reforms, rather than overall direction • Indian companies and entrepreneurs have oriented themselves to live – and thrive – in free markets: world class management • While the macro-economy looks good, fiscal deficits could rekindle inflationary pressures, a hardening interest rate environment will put growth on a +6% trajectory • Infrastructure: Lot of talk, little action – inflection point? • Yes, shake hands – but count how many fingers you get back!
India – A Wonderful Long-term Theme, But On A Bumpy Road Requires Our Tried and TestedResearch and Investment Process to give Clients with a Long-term investment philosophy a Channelthat aims to outperforms on the Upsideand limits the Downside
