Quant Flexi Cap Fund vs. JM Flexi Cap Fund: Which One’s Better?
April 27, 2024 Mutual Fund
The Indian equity market’s current volatility and uncertainties, has got investors in mutual funds, particularly novice and inexperienced ones, highly concerned. They are unsure about which caps to wager on-the large caps, the mid caps, or the small caps. When the dynamic of the market shifts, some may also wonder when to switch from one category to another.
Are you in the same boat? Here’s a simple solution, you may consider investing in Flexi Cap mutual funds based on your suitability.
Flexi-cap funds are a popular choice for investors in 2024 for several reasons. They have the potential to yield higher returns and provide diversification and dynamic asset allocation. Fund managers have the flexibility to make investments across market capitalizations, sectors, and themes with flexi cap mutual funds. This means that fund managers can invest anywhere based on their outlook on the market.
Retail investors take into account a wide range of aspects when deciding which mutual fund scheme to invest in. These factors include the scheme’s category, the macroeconomic environment, the fund house’s reputation, and the past performance of the fund managers.
However, one key concern that can sway an investor’s decision in one direction or another is the historical returns given by the fund scheme, compared to similar schemes in the same mutual fund category. Remember that past performance does not guarantee future results. For this reason, while selecting a Flexi Cap mutual fund strategy to invest in, one must take other factors into account.
[Read: 4 Best Flexi Cap Funds for 2024 – Top Performing Flexi Cap Mutual Funds in India]
Two of the most recent popular contenders in the Flexicap segment are Quant Flexi Cap Fund and JM Flexi Cap Fund. This comprehensive analysis delves into a head-to-head comparison of these funds, equipping you with the knowledge to make an informed investment decision.
Quant Flexi Cap Fund, erstwhile known as Quant Consumption Fund, is a popular option for investors seeking to generate consistent returns by investing in a portfolio of large cap, mid cap and small cap companies. It is an open-ended equity scheme that belongs to Quant Mutual Fund.
The scheme was recategorized and renamed Quant Flexi Cap Fund in January 2022. It was originally launched in September 2008 and currently has an AUM of Rs 4,616.85 crores (as of Mar 31, 2024). Quant Flexi Cap Fund is benchmarked against Nifty 50 – TRI as a primary index and Nifty 500 – TRI as a secondary index.
JM Flexi Cap Fund is an open-ended equity scheme and belongs to JM Mutual Fund. It is a well-established flexi cap mutual fund scheme launched in September 2008 and currently has an AUM of Rs 1,773.87 crores (as of Mar 31, 2024).
The fund’s primary goal is to generate long-term capital growth from an actively managed portfolio primarily of equity and equity-related securities. The fund manager actively researches and selects companies with robust financials, strong management teams, and sustainable competitive advantages.
JM Flexi Cap Fund is benchmarked against Nifty 50 – TRI as a primary index and S&P BSE 500 – TRI as a secondary index.
Investment Style and Philosophy:
- Quant Flexi Cap Fund has grown in size over the years. The fund has done exceptionally well under its current mandate and has turned out to be the top-performing scheme in the flexi cap category. It follows an aggressive investment approach, constantly looking for opportunities to generate high alpha.In other words, the fund holds many of its stocks with a short-term view, and as a result, the fund has recorded a high portfolio turnover in the last one year. The fund manager endeavours to adjust the allocation between these categories based on their market outlook.
- JM Flexi Cap Fund aims to invest in quality stocks across market caps and sectors available at reasonable or attractive valuations. The Scheme has focused on consistency across periods by using a dynamic allocation approach across market caps.The fund manager continuously assesses the valuation of different market segments (large, mid, and small-cap). They aim to invest more in undervalued sectors and companies with higher growth prospects compared to their valuation.
Expense Ratio of the Schemes
When comparing mid cap funds, the Expense Ratio, which represents the annual fee charged, plays a crucial role in determining your returns. Here’s a quick breakdown of Quant Flexi Cap Fund vs JM Flexi Cap Fund:
| Scheme Name | Direct Plan Expense Ratio | Regular Plan Expense Ratio |
| Quant Flexi Cap Fund | 0.68% | 1.85% |
| JM Flexi Cap Fund | 0.23% | 1.98% |
Data as of March 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)
JM Flexi Cap Fund offers a lower expense ratio in the direct plan, indicating higher net returns for investors compared to Quant Flexi Cap Fund, and it also offers a cost advantage to investors. There is a slight difference in the expense ratio under the regular plan for both schemes.
Remember, a lower Expense Ratio translates to potentially higher returns over time. Over the long term, even a seemingly small difference in Expense Ratio can accumulate and significantly impact your returns.
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Performance Comparison: Rolling Returns
Scheme Name Absolute (%) CAGR (%) 1 year 3 Years 5 Years 7 Years 10 Years JM Flexi Cap Fund (G)-Direct Plan 36.39 21.84 14.53 16.14 19.02 Quant Flexi Cap Fund(G)-Direct Plan 30.76 34.24 17.89 19.74 23.02 Flexi Cap – Category Average 40.19 19.66 17.14 14.69 15.97 Benchmark – Nifty 500 TRI 21.85 19.25 12.35 13.42 12.78 Data as of April 23, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)Historical data shows that both funds have delivered substantial returns across most timeframes. Quant Flexi Cap Fund boasts a commendable track record, consistently delivering competitive returns to investors. It has outperformed the benchmark Nifty 500 TRI across most time frames.
JM Flexi Cap Fund shows a decent overall performance and is at par with its peers and the benchmark index. Looking at absolute returns over the last year, JM Flexi Cap trails the category average by a slight margin.
However, when we consider longer timeframes, JM Flexi Cap starts to outperform the category average. Over 5 and 7 years, it delivers marginally better returns. Notably, JM Flexi Cap shines in the 10-year horizon, significantly exceeding both the category average and the benchmark Nifty 500 TRI.
While Quant Flexi Cap Fund has lagged behind JM Flexi Cap Fund in the past year, its performance over 3, 5, 7, and 10 years demonstrates a healthy track record of generating returns above the category average and the benchmark. This indicates its potential for long-term wealth creation.
Overall, both JM Flexi Cap Fund and Quant Flexi Cap Fund have delivered competitive returns, with Quant Flexi Cap Fund showcasing exceptional performance. However, it's important to note that this higher return comes with slightly higher volatility.
While both the scheme's historical performance is encouraging, it's crucial to remember that past performance doesn't guarantee future results. Conduct thorough research and consider your risk tolerance and investment goals before making investment decisions.
Portfolio Composition: Asset Allocation of Schemes
Both Quant Flexi Cap Fund and JM Flexi Cap Fund are popular amongst investors in the mid cap segment, but their asset allocation strategies differ slightly.
Scheme Name Large Cap % Mid Cap % Small Cap % Others % Quant Flexi Cap Fund 47.17 18.67 18.70 15.46 JM Flexi Cap Fund 49.74 14.67 31.43 4.19 Data as of March 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)Both funds are primarily invested in large-cap companies. JM Flexi Cap Fund exhibits a tilt towards small-cap stocks, with a historical average allocation ranging between 20-30%. Large-cap and mid-cap holdings typically constitute the remaining portion. This strategy aims to capture the growth potential of small-caps while maintaining stability with large-cap exposure.
In the case of Quant Flexi Cap Fund, the fund manager demonstrates a more balanced approach across market capitalisations. The historical allocation reflects a mix of large-cap (30-40%), mid-cap (30-40%), and small-cap (20-30%) stocks. This diversification strategy offers exposure to growth across different market segments while potentially mitigating risk through large-cap stability.
Quant Flexi Cap Fund appears to follow a more balanced approach with nearly equal weightage to mid and small-cap stocks. On the other hand, JM Flexi Cap Fund seems to skew toward small-cap stocks aiming for higher returns.
Overall, Quant Flexi Cap Fund's approach reflects a more traditional Flexi Cap philosophy, aiming to balance growth potential with stability. While JM Flexi Cap Fund's strategy may follow an aggressive approach to build on the potential for higher returns with higher exposure to small-cap stocks.
Market Volatility: Risk Profile of Schemes
The equity market experiences constant ups and downs, and Flexi Cap funds are particularly susceptible to these fluctuations.
Risk Ratio (3 years) Quant Flexi Cap Fund JM Flexi Cap Fund Category Average – Flexi Cap Funds Standard Deviation 19.11 14.74 13.59 Sharpe Ratio 0.42 0.45 0.42 Sortino Ratio 0.88 0.95 0.90 Data as of April 23, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)Quant Flexi Cap Fund appears to be riskier with a higher Standard Deviation (19.11) compared to JM Flexi Cap Fund (14.74). This indicates that the returns of Quant Flexi Cap Fund have fluctuated more significantly over the past 3 years. The Sharpe Ratio for both funds falls below 1, which suggests that the returns haven't consistently outperformed the risk-free rate over the past 3 years.
JM Flexi Cap Fund again edges out Quant Flexi Cap Fund with both Sharpe Ratio (0.45 vs 0.42) and Sortino Ratio (0.95 vs 0.88). This suggests that JM Flexi Cap Fund might potentially deliver a better return for the level of risk involved.
While JM Flexi Cap Fund shows a slight edge in terms of both volatility and risk-adjusted returns, the differences are relatively small. Both funds fall within the moderate risk category. It's important to consider other factors like your investment goals and risk tolerance before making a decision.
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Top Holdings of the Flexi Cap Schemes:
Quant Flexi Cap Fund JM Flexi Cap Fund Company % Assets Company % Assets Reliance Industries Ltd. 9.81 HDFC Bank Ltd. 5.60 JIO Financial Services Ltd. 5.52 ICICI Bank Ltd. 4.47 Adani Power Ltd. 4.95 Larsen & Toubro Ltd. 4.47 Treasury Bills 4.83 Infosys Ltd. 3.36 Tata Consultancy Services Ltd. 4.66 State Bank Of India 3.35 Samvardhana Motherson International Ltd. 4.19 Mahindra & Mahindra Ltd. 2.98 Swan Energy Ltd. 4.05 ITC Ltd. 2.92 Housing & Urban Development Corporation Ltd. 3.59 Bank Of Baroda 2.90 Biocon Ltd. 3.21 Bharti Airtel Ltd. 2.67 Britannia Industries Ltd. 2.81 Tata Consultancy Services Ltd. 2.64 Data as of March 31, 2024
Do note past performance is not an indicator of future returns
The securities quoted are for illustration only and are not recommendatory.
(Source: ACE MF, data collated by PersonalFN Research)While past holdings don't necessarily dictate future positioning, analysing the top holdings of these Flexi Cap funds offers valuable insights into their investment philosophies and sector preferences.
Looking at the top holdings of Quant Flexi Cap Fund and JM Flexi Cap Fund, some interesting differences emerge. Quant Flexi Cap Fund has a higher concentration in its top holdings, with Reliance Industries and Jio Financial Services Ltd. each exceeding 4% of the fund's assets. In contrast, JM Flexi Cap Fund has a more diversified approach, with its top holding (HDFC Bank) constituting a smaller portion (around 5.6%).
Sectorally, both funds appear to have a tilt towards financials. Reliance Industries, Jio Financial Services, HDFC Bank, ICICI Bank, and other holdings suggest a significant weightage in the financial sector for both Quant Flexi Cap Fund and JM Flexi Cap Fund. However, the specific weightage might differ based on the complete fund portfolio not shown here. They also hold onto IT major Infosys and FMCG giant ITC, indicating a broader sectoral spread.
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Suitability of Investors to the Schemes:
Quant Flexi Cap Fund This fund caters to investors seeking a more balanced approach with exposure across market capitalisations. The active management style and focus on fundamentals offer a potentially lower-risk option compared to JM Flexi Cap Fund. However, the higher expense ratio might impact long-term returns.
JM Flexi Cap Fund might be suitable for investors with a moderate risk appetite seeking long-term capital appreciation. The quantitative approach and focus on small-caps can potentially generate higher returns but may experience higher volatility compared to Quant Flexi Cap Fund. The lower expense ratio makes it an attractive option for cost-conscious investors.
Both schemes are suitable for investors willing to accept moderate to high volatility in exchange for higher potential returns. And for the ones with a long-term investment horizon of at least 5-7 years or more.
To summarise…
Looking ahead, the Flexicap segment in 2024 appears promising. The ability of these funds to adapt to changing market conditions makes them suitable for investors seeking long-term capital appreciation.
If the Indian economy rebounds in the latter half of 2024, as some analysts predict, Flexicap funds could be well-positioned to benefit from a potential rise in mid-cap and small-cap stocks. However, careful research and consideration of your risk tolerance are crucial before investing in any Flexicap fund. Both Quant Flexi Cap Fund and JM Flexi Cap Fund are strong contenders but cater to different investor profiles.
Ultimately, the best choice depends on your individual risk appetite and investment goals. Consulting a SEBI-registered financial advisor can be invaluable to ensure optimal alignment with your specific investment objectives.
Remember, a well-diversified portfolio across market caps/sectors and asset classes may help manage overall risk while potentially benefiting from its growth potential.
This article first appeared on PersonalFN here
