The article is divided into two sections:
- Quant Mutual Funds
- Front-running
Now let’s discuss types of Mutual Fund
Anyone interested in investing must have at least heard of mutual funds (given the wide audience of this blog).
So in mutual funds, your principal is invested in a diversified collection of assets rather than just one stock or bond. There are various types of mutual funds, like equity funds and index funds (e.g., NIFTY 50, which invests in the top 50 stocks of the NSE).
But what exactly are Quant Mutual Funds?
Imagine a mutual fund where your money is strategically invested across different stocks and sectors, using mathematical models and algorithms to predict returns.
That’s precisely what Quant Mutual Funds do. These funds rely on quantitative analysis (which means using math and data) to make investment decisions, aiming to optimize returns through data-driven strategies.
Types of Quant Mutual Funds and Their Returns
- Quant Infrastructure Fund: Invests in infrastructure stocks. Annual return: 32.4%.
- Quant Active Fund: Invests in diversified equity. Annual return: 39.5%.
- Quant Small Cap Fund: Invests in small-cap stocks. Annual return: 28%.
- Quant Tax Plan Fund: Tax-saving fund. Annual return: 15-18%.
- Quant Gold Fund: Invests in gold. Annual return: 8-12%.
Recently, These Funds Haven't Been Giving Much Return in 2024
Historically, these funds were known for their impressive annual returns, However these have seen a significant drop in returns in 2024 compared to recent years. As issues like front-running have affected their performance.
What is Front-Running?
Front-running is a practice where a fund or an insider executes orders based on advanced knowledge of upcoming trades that are likely to affect stock prices. In simple terms, someone with access to confidential information places trades before large orders are executed, taking advantage of price movements caused by those trades. This unethical practice can result in profits for the insider, but it harms other investors.
Quant Mutual Fund and the Front-Running Case
In 2024, Quant Mutual Fund has been involved in a front-running scandal. It was revealed that certain employees or insiders were using privileged information to make trades ahead of large orders.
This caused a drop in investor confidence and led to a SEBI (Securities and Exchange Board of India) investigation. As a result, the CEO of Quant Mutual Fund resigned, and the company has faced scrutiny over its internal practices.
The SEBI investigation is ongoing, and the mutual fund industry is awaiting further updates. This incident has raised questions about the transparency and fairness of some investment practices in the industry.
