Quant Mutual Fund crisis is another lesson in diversification. Here's how
Diversification in the investment world is not limited to spreading your bets across asset classes and stocks but Sebi's investigation against Quant Mutual Fund in a front-running case is also a reminder of concentration risk in owning mutual funds from just one asset management company.
We have seen returns of Axis Mutual Fund getting affected for some time after the front-running case it was embroiled in and now we have Quant's example. Investors whose portfolios have only Quant Mutual Fund schemes are now worried.
The important question that comes is how important is diversifying across mutual fund companies for an investor?
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“Diversifying across mutual fund companies is crucial for an investor. It helps mitigate various risks, such as market risk, liquidity risk, entity risk, fund manager risk, and regulatory risk. For instance, the returns of Axis were significantly impacted after the front-running case, and now investors with portfolios solely in Quant MF are concerned due to the recent SEBI inspection. By spreading investments across multiple fund houses, investors can benefit from different investment styles and reduce the risk associated with any single AMC,” said Shweta Rajani, Head — Mutual Funds at Anand Rathi Wealth Limited.
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