Quant Equity Savings Fund NFO Opens July 7, Targets Income with Stability via Arbitrage

The Quant Equity Savings Fund is a hybrid equity savings scheme offered by Quant Mutual Fund. This open-ended fund aims to generate regular income through arbitrage opportunities in the cash and derivatives segments of the equity market, combined with investments in debt and money market instruments. Additionally, the scheme seeks to provide long-term capital appreciation by maintaining unhedged exposure to equity and equity-related instruments. The fund follows an actively managed approach and offers investors the potential for income generation and capital growth with reduced volatility. It uses a variety of sophisticated strategies, including arbitrage, hedging, and derivatives-based techniques, to optimise returns while controlling risk.

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Key Features of Quant Equity Savings Fund

• Opening Date: July 7, 2025
• Closing Date: July 21, 2025
• Exit Load: 1% if redeemed within 15 days of allotment, Nil if redeemed after 15 days
• Minimum Investment Amount: ₹5,000 (in multiples of ₹1 thereafter)
• Fund Type: Open-ended hybrid equity savings scheme
• Benchmark: Nifty Equity Savings TRI

The objective of the Quant Equity Savings Fund

The Quant Equity Savings Fund- Direct (G) seeks to generate regular income and long-term capital appreciation by investing in arbitrage opportunities within equity markets, alongside debt and money market instruments. A portion of the portfolio remains unhedged in equity to capture growth potential.

Investment Strategy of Quant Equity Savings Fund

• Active management of equity, derivatives, and debt instruments to meet dual objectives
• Arbitrage opportunities captured through cash-futures price differentials
• Use of index arbitrage to exploit pricing mismatches between index futures and constituent stocks
• Equity derivatives are used for portfolio protection and risk hedging
• Covered call strategy deployed to enhance returns and reduce downside risks
• Event-driven strategies such as merger arbitrage, dividend arbitrage, and rights offer arbitrage
• Calendar spreads and other derivatives strategies are used to profit from price spreads
• Dynamic asset allocation between equities, debt, and derivatives based on market opportunities

Risks Associated with Quant Equity Savings Fund

• Market Risk: Price volatility in equity markets can affect portfolio returns
• Derivative Risk: The use of derivatives involves leverage, which can magnify gains or losses
• Liquidity Risk: Low trading volumes may impact the scheme’s ability to exit investments timely manner
• Basis Risk: In spot-futures trades, price mismatches at reversal may lead to losses
• Credit Risk: Debt investments face the risk of default or downgrades by issuers
• Regulatory Risk: Changes in SEBI or RBI guidelines may affect portfolio liquidity or structure
• Settlement Risk: Delays in securities settlements may impact redemption timelines
• Concentration Risk: Sectoral or stock-specific exposures can increase volatility

Risk Mitigation Strategy by Quant Equity Savings Fund

• The Quant Equity Savings Fund employs a diversified, actively managed approach to mitigate risks. In equities, diversification across sectors and market caps helps reduce concentration and liquidity risks. 
• In derivatives, strict internal controls ensure exposure remains within SEBI-prescribed limits. The fund uses equity derivatives for hedging and income generation, limiting downside risks. 
• In debt, rigorous credit analysis is conducted, assessing the financial health and management quality of issuers to control credit risk. 
• Liquidity risk is addressed by favouring liquid securities and staggered maturities. The fund manager may also use interest rate swaps for hedging purposes. 

These combined strategies aim to maintain optimal risk-adjusted returns.

What Type of Investor Should Invest in Quant Equity Savings Fund?

• Investors seeking regular income with controlled volatility through arbitrage opportunities
• Those comfortable with moderate exposure to equity for long-term capital growth
• Investors with a medium-term investment horizon
• Individuals looking for a hybrid investment combining equity, debt, and derivatives
• Suitable for those who understand the basic risks of market fluctuations and derivatives exposure