Review: Quantum Equity Fund of Funds NFO

Quantum AMC has introduced a unique mutual fund that invests not in equity shares but in diversified equity schemes of mutual fund. Yes! it’s a fund that invests in other mutual funds. It has been named as Quantum Equity Fund of Funds. The NFO will be available for purchase from 26th June to 13th July.

Minimum Investment: Rs. 5000

Entry Load: Nil | Exit Load: 1.5% within 1 year

Investment Objective: The investment objective of the scheme is to generate long-term capital appreciation The scheme will invest in a portfolio of open-ended diversified equity schemes of mutual funds registered with SEBI

What is this Fund all about: It is an Equity Fund of Funds - It would invest in 5-10 diversified equity schemes of other mutual funds

Asset Allocation: 90-100% in Equity Schemes | 0-10% in Money Market Instruments

SO, IS THIS A GOOD INVESTMENT OPTION?

The fund house claims that the Equity fund of funds will simplify the investment as investor will no longer have to choose from 1000’s of funds. Agreed, but,this does not make it a good fund. Following are some of its drawbacks-

The fund is dependent on other AMCs: What kind of fund managers are they who are following other fund managers. Their own mind could bring more profit. Right? Every mutual fund company discloses the portfolio allocation of all mutual funds. This means that everybody know which all stocks a particular scheme is investing in. If Equity fund-of-funds fund manager can like a particular mutual fund’s asset allocation, why can’t he directly invest in those stocks?
Additional Expense: Every mutual fund takes a part of total AUM as expense. Investor of Quantum Equity fund-of-funds will actually pay this expense twice. Firstly, the mutual fund where your money is invested will cut some expense, and secondly, Quantum AMC will charge you 0.75% of your investment. So end up paying twice. Its just like a retailer purchasing a product from wholesale dealer and selling it to you. The retailer will obviously keep his profit.
More Tax: The tax slab applied on this scheme will be of Debt Fund. So, you will lose more money as tax payment on dividend announcements

Now it’s upto you to decide who will handle your money? A wholesaler or A retailer!