New Small Cap Fund from Quantum AMC: Know how it plans to make money, address liquidity challenge

financialexpress.com:

Quantum AMC has announced the launch of a new fund offer (NFO) – Quantum Small Cap Fun, which is an open-ended equity scheme predominantly investing in Small Cap Stocks. The scheme will open for subscription on Monday, October 16 and close on Friday, October 27, 2023. It will be co-managed by Chirag Mehta – Chief Investment Officer and Abhilasha Satale.  

In a statement, Quantum AMC said the scheme will be benchmarked against the S&P BSE 250 Small Cap total return index (TRI). Its investment objective is to generate capital appreciation by investing in Small Cap Stocks. The scheme will have a Direct and Regular Plan. The fund managers will allocate 65%-100% to the equity and equity-related instruments of Small Cap Companies. The scheme’s investment philosophy include:

Chirag Mehta, Chief Investment Officer & Fund Manager, Quantum AMC, said that this fund is meant for investors who are looking for long-term capital appreciation.

“We have seen that in the long term, small-cap stocks have demonstrated the capability of giving good returns potential. To ensure good returns for our customers, we will make investments in lesser-known, smaller businesses with growth prospects. Over a period of time, these companies increase their revenue and earnings, which can ensure good returns for our investors,” he said.

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According to Mehta, the biggest challenge in the small-cap mutual fund space today is a large asset under management (AUM) size. Funds with large AUM tend to face liquidity issues if they end up owning a big part of a small-cap stock’s market capitalization. They may be compelled to have a long tail of stocks with unsubstantial weights. They may