The transformation of Escorts Mutual Fund into Quant Mutual Fund in 2018 represents one of the most statistically significant evolutions in the Indian asset management industry.1 Under the leadership of Sandeep Tandon, the fund house has implemented a rigorous, data-driven methodology that deviates sharply from the traditional discretionary fundamental analysis prevalent among domestic peers. This shift is evidenced by the firm's Money under Management (MuM), which stood at a mere 166 crores in December 2019 and surged to over 93,900 crores by early 2026.2 This expansion, representing a growth of approximately 52,755%, has been driven by a proprietary investment engine that synthesises macro-economic indicators, quantitative modelling, and behavioural analytics.2 However, as the global and domestic market regimes shifted in late 2025 and early 2026, many of Quant’s flagship funds encountered a "quant wobble," a period of underperformance that necessitates a deep dive into the underlying models and the ability of the firm’s multi-manager team to adapt to a changing interest rate and liquidity environment.4

The Quant Flexi Cap Fund: Dynamic Agility

The Quant Flexi Cap Fund is characterized by 100% fungibility, meaning the fund manager is entirely unconstrained by market cap limits.2 The strategy is built on "Flexibility creates Adaptability," allowing the portfolio to be completely underweight or overweight in large, mid, or small caps depending on the prevailing risk-on or risk-off environment.2 This fund typically overweights the "Volatility factor," prioritizing stocks with a high standard deviation of returns which tend to outperform during bullish regimes but can lead to sharper corrections during market downturns.8

As of early 2026, the Flexi Cap portfolio remains tilted toward large caps to ensure liquidity, though it has recently increased exposure to select mid and small caps following the 2026 Union Budget.2 Key sectoral shifts involve an increased allocation to financial services and automobiles, while exposure to IT software and FMCG has been pruned.2 The fund's ability to pivot aggressively is reflected in its high portfolio turnover ratio, which is a byproduct of its dynamic rebalancing mandate.8

The Quant Focused Fund: High-Conviction Concentration

In contrast to the broader diversification of the Flexi Cap Fund, the Quant Focused Fund limits its holdings to a maximum of 30 stocks.2 This concentration is intended to maximize alpha from the manager's highest-conviction ideas.10 As of December 2025, the top 10 holdings of this fund represented approximately 70.27% of its total net assets, a significantly higher concentration than the category average of 35.3%.9

The fund remains predominantly large-cap focused (approximately 82.6%) to mitigate the liquidity risks associated with such a concentrated portfolio.10 Recent sectoral themes have favored the "Old Economy," specifically construction, power, and metals and minerals trading.9 Major holdings include Larsen & Toubro, Adani Green Energy, and Adani Enterprises.10 While this fund provides significant upside potential if the selected stocks perform, its Beta of 1.15 indicates it is more volatile than the broader market, relying heavily on the accuracy of the VLRT timing indicators for its concentrated exits.9

The Quant Value Fund: Exploiting Neglect and Overreaction

Value investing at Quant is not a mechanical search for low P/E ratios but a quest for "neglected" assets.2 Drawing on the Babson multiplier method, the fund seeks to determine the "normal" value of a company and identifies stocks trading in the "neglected category" due to investor overreaction to temporary cycles.2 The fund's core thesis is that value stocks eventually become the new growth stocks once market perception reverts to the mean.2

The Quant Value Fund typically requires an elongated investment horizon, often 3 to 5 years, to allow the "Time" dimension of VLRT to play out.2 Recently, the fund has been constructive on the financialization and energy security themes, with substantial weights in Piramal Finance, LIC, and Adani Power.2 Its Standard Deviation of 21.18 is among the highest in the Quant equity suite, reflecting the intense volatility that characterizes contrarian and value-based strategies before the market realizes their true value.12

The Quantamental Fund: Harmonizing Objectivity and Subjectivity

The Quantamental Fund is described as the "Fusion of the finest," where the rules-based mechanical approach of quantitative analytics is combined with the value of years of human judgment.2 The fund's logic is rooted in a study showing that 65% of alpha originates from broad market factors, while 35% comes from specific stock selection and human insight.2 This dual approach aims to "add alpha while subtracting Beta," providing a more stable return profile than pure discretionary or pure quant funds.2

A unique feature of the Quantamental strategy is its mandate to allow up to 100% hedging through derivatives during periods of hyper-volatility and up to 20% investment in developed overseas markets.2 This overseas exposure provides the model with a broader data set from more efficient markets to refine its predictive capabilities.2 As of late 2025, the fund's top holdings were led by Piramal Finance and Jio Financial Services, with a sectoral focus on finance and construction.2

The Quant Business Cycle Fund: Timing Macroeconomic Inflexions

The Quant Business Cycle Fund focuses on "Cycles Analytics," leveraging insights into macroeconomic forces such as monetary policy, fiscal health, and technology cycles to identify sectors on the cusp of growth.2 The fund identifies "Cycles Synchronicity"—the simultaneous occurrence of cycle beginnings or ends—to predict market inflection points.2

The scheme strategy involves tilting exposure to 6-8 sectors and concentrating 3-4 core sectors that are expected to benefit from the current phase of the economy.2 Sector allocation is capped at 33.33% to manage risk.2 In the portfolio update for December 2025, the fund was heavily allocated to Samvardhana Motherson, Adani Green Energy, and Samvardhana Motherson, focusing on the themes of auto components and power.2 This fund is managed as a focused flexi-cap scheme, aiming to protect the portfolio from secular declines by exiting sectors before they reach their cyclical peak.2

The Quant Momentum Fund: Capitalizing on Trend Persistence

The Quant Momentum Fund is built on the empirical evidence that high-performing stocks tend to continue outpacing those with weaker returns over the short-to-medium term.2 However, the fund distinguishes its approach by targeting "Idiosyncratic Momentum"—the portion of price movement that cannot be explained by standard factors like size or value.2 Research suggests that idiosyncratic momentum portfolios generate comparable returns to traditional momentum but with half the volatility.2

The fund employs the Black-Litterman model to improve asset allocation decisions and identifies winners on a continuous basis.2 In January 2026, the fund's managers noted that both earnings and price momentum had remained weak, prompting a shift to a more defensive stance to minimize transaction and impact costs.2 The portfolio has recently increased allocation to metals and banks, looking for a comeback in earnings momentum even while price momentum remains under pressure.2

While each Quant fund maintains a specific thematic mandate, an analysis of portfolio overlaps reveals a shared core strategy driven by the unified VLRT engine. The Quant Flexi Cap Fund functions as the primary vehicle for the house's highest-conviction ideas, maintaining the largest number of holdings (approximately 43) and carrying a majority of the stocks found across other specialized funds.

The percentage of portfolio overlap between the Flexi Cap Fund and its peers highlights the degree of strategic convergence:

The substantial 52% overlap with the Quantamental Fund indicates that the Flexi Cap strategy is heavily influenced by the same automated, rules-based quantitative signals. Conversely, the 28% overlap with the Business Cycle Fund—the lowest in the group—underscores the distinct nature of 'Cycles Analytics' and macro-inflection point identification compared to the standard multi-cap rotation logic.

Crowded Trades and Factor Correlation Breakdowns

A major driver of recent underperformance is the unwinding of "crowded trades".4 As Quant's methodology became high-profile and successful, many sophisticated global systematic managers began using similar signals—momentum leadership and quality screens.4 In 2025, these factors became over-positioned, and when the unwind came, it resulted in a "quant quake" similar to the events of 2007-2009.18

During mid-2025, a "junk rally" occurred where lower-quality, heavily shorted, and volatile stocks outperformed the high-quality, profitable stocks favored by systematic models.5 In such regimes, factor correlations break; signals that normally diversify a portfolio begin to move in unison, exposing the fund to a "long tech / short junk" macro trade failure.4

The Adani Group Market Turbulence

Quant Mutual Fund has historically held high-conviction positions in various Adani group companies across its Flexi Cap, Focused, and Multi Cap funds.19 In November 2024, renewed turbulence in Adani group stocks led to a sharp NAV decline for Quant schemes.19 On November 21, 2024, these funds fell between 1% and 1.44%, while the broader category fell only 0.24-0.3%.19 This underscores the risks inherent in Quant's concentration strategy; when its primary "Adaptive Alpha" targets face idiosyncratic shocks, the impact is disproportionately large.

The SEBI Front-Running Investigation

In June 2024, the Securities and Exchange Board of India (SEBI) conducted search and seizure operations at Quant AMC’s Mumbai headquarters and at the addresses of suspected beneficiaries in Hyderabad.11 The regulator suspected a "front-running" case, wherein confidential information regarding upcoming large trades was allegedly leaked.11 While front-running is typically the result of individual misconduct, it triggered net outflows of approximately 2,794 crore in a single week.

Macro-Economic Shocks in Early 2026

The beginning of 2026 introduced new macro-volatility. The nomination of Kevin Warsh as Chair of the US Federal Reserve triggered a strengthening dollar and firming bond yields.2 In January 2026 alone, the Indian Nifty corrected by 3.1%, while high-duration growth assets like Bitcoin corrected by 10%.2 This environment was particularly unforgiving for emerging tech themes and speculative growth stories where Quant's Momentum and Teck funds had previously thrived.

Maximum Return Potential: Flexi Cap and Momentum

The Quant Flexi Cap Fund and Quant Momentum Fund hold the highest potential for maximum absolute returns.2 Their strategies are designed to "uncap the potential of 100% fungibility," allowing them to ride the strongest market trends regardless of cap size.2 The Momentum Fund’s use of idiosyncratic factors aims to identify winners on a continuous basis, which can lead to exponential wealth creation during secular bull markets.2 However, these funds are subject to "momentum reversals" and "junk rallies," which can lead to significant short-term deviations from the benchmark.5

Best Risk-Adjusted Returns: Quantamental and Business Cycle

The Quantamental Fund and Business Cycle Fund offer the most compelling potential for risk-adjusted returns.2

• The Quantamental approach "subtracts Beta" by incorporating fundamental judgmental layers and derivative hedging, providing a "safety net" that pure quant models lack.2 This structure makes it ideal for navigating the "P/E contraction phase" Tandon expects in 2026. 
• The Business Cycle Fund’s focus on macro-inflection points helps it exit vulnerable sectors before they enter a cyclical downturn.2 By concentrating on only 3-4 core sectors that are on the cusp of growth, the fund aims to generate superior alpha without exposing the investor to the drag of broad market mediocrity.2

The Contrarian Choice: Quant Value Fund

The Quant Value Fund represents a high-potential, high-volatility tactical play.2 For investors with a long-term (6-year+) horizon, the fund’s focus on neglected stocks and under-owned sectors (like insurance and pharma in late 2025) offers a way to buy into themes before they become the next growth darlings. While its risk-adjusted measures like the Sharpe Ratio may appear lower during growth-led markets, it provides critical diversification for a portfolio otherwise tilted toward momentum.2

While the Flexi Cap Fund prioritizes agility across market capitalizations, the Business Cycle Fund prioritizes concentration within specific macroeconomic themes.

The Business Cycle Fund has the potential to outperform during regime shifts or "Cycle Synchronicity" (when multiple economic cycles begin or end simultaneously).

The Business Cycle Fund's potential to "beat all others" is highest in a distorted or non-linear market where only a few sectors are driving growth (e.g., a massive infra or pharma boom). Conversely, the Flexi Cap fund is more likely to lead in a broad-based bull market where agility across market caps is the primary driver of alpha.

For 2026, Sandeep Tandon’s outlook favors "Old Economy" sectors like Pharmaceuticals and Insurance. Because the Business Cycle Fund can more aggressively concentrate into these specific "neglected" sectors compared to the broader Flexi Cap, it may indeed be the fund with the highest potential to lead if those specific thematic cycles turn favorable this year.