Quant vs Nippon India Small Cap Fund: Rs 1 lakh crore battle of returns, strategy, and 3-5-10 year returns

In the high-stakes world of Indian small caps, two titans are currently locked in a battle for your money. On one side, we have Nippon India Small Cap Fund – Direct Plan – Growth, the “Goliath” of the industry, a seasoned fund with an asset under management (AUM) size of Rs 68,572 crore with a traditional, steady-hand approach. On the other side stands Quant Small Cap Fund – Direct Plan – Growth, the “Technician,” a leaner, hyper-aggressive contender with an AUM size of Rs 30,170 crore that relies on data-heavy quantitative models to outpace the market.

While both track the Nifty Smallcap 250 TRI, their paths to wealth creation couldn’t be more different. One focuses on diversification; the other hunts for alpha. Here is how they stack up when the dust settles over the last decade.

Quant vs Nippon India: Approach in investment

The direct plans of the Nippon India Smallcap Fund and the Quant Smallcap Fund, both schemes, were launched on the same day, January 1, 2013, making them battle-hardened survivors of multiple market cycles. As small-cap funds, they both sit at the “Very High Risk” end of the riskometer.

However, their philosophies diverge at the roots:

• Nippon India focuses on consistency, blending small-cap equity with a strategic touch of debt to smooth out the bumps.
• Quant lives by the numbers, using a quantitative framework to manage an aggressive mix of equity and money market instruments, often using derivatives to hedge or boost returns.

Nippon India Smallcap Fund vs Quant Smallcap Fund: CAGR of 3, 5, 10 years

When looking at trailing returns, the competition remains tight in the short term but widens over longer durations. Over the past year, both funds have given negative returns, where the Nippon India small-cap fund grew at a negative CAGR of -4.65%, Quant small-cap fund gave a negative annualised return of -2.19%. In the 3-year window, Nippon India holds a marginal lead with 22.34% against Quant’s 21.28%.

The 5-year and since-inception metrics tell a different story. Quant has delivered a 30.79% CAGR over five years, notably higher than Nippon’s 28.08%. 

Over the 10-year period, Quant Small Cap Fund posted a 20.04% CAGR, while Nippon India Small Cap Fund delivered a slightly higher 10-year CAGR of 20.64%.

Since their launch in 2013, Nippon India smallcap fund has maintained a lead with 24.39% while 17.54% returns, compared to for the Quant small cap fund. These figures indicate that while Nippon shows resilience in the 3-year cycle, Quant has utilised its smaller size to capture higher growth over a full five-year cycle.

Nippon India Smallcap Fund vs Quant Smallcap Fund: Risk and ratio metrics

Numbers alone do not define a fund without accounting for the turbulence required to achieve them. The Sharpe Ratio, which measures risk-adjusted returns, shows Nippon India at 1.09 and Quant at 0.95. These ratios suggest that for every unit of risk taken, Nippon has historically provided a slightly more efficient return profile. Quant compensates for this higher volatility with its use of derivatives and a higher portfolio turnover.

Cost remains a major differentiator due to the vast difference in AUM. Nippon India leverages its scale to offer a Direct Plan Expense Ratio of 0.63%. Quant, despite its smaller size, is more expensive for the investor with an expense ratio of 0.7%.

Meanwhile, Nippon India imposes a 1% exit load if more than 10% of the investment is withdrawn within a month. Quant has a stricter exit policy, charging 1% if the investment is redeemed within 15 days, though this is rarely a hurdle for long-term investors.

Quant vs Nippon India: Portfolio composition and strategy

The two funds take opposite approaches to diversification. Nippon India manages a highly diversified portfolio of 212 stocks. Its top holdings include Tube Investments of India, HDFC Bank, and Apar Industries. The fund maintains 95.8% in equity and roughly 4.1% in cash or cash equivalents.

Quant maintains a much tighter ship with only 94 holdings. Its top picks include Reliance Industries, HDFC Bank, and Jio Financial Services (incidentally, all large-cap stocks). Notably, Quant holds a significant 11.01% in “Other” instruments, which includes its active use of derivatives for hedging or enhancing returns. This concentration and use of index instruments explain the higher portfolio turnover compared to Nippon’s more traditional buy-and-hold style.

Quant vs Nippon India: Fund management and experience

Nippon India is managed by Samir Rachh and Kinjal Desai. Rachh brings over 30 years of experience, while Desai specializes in international equities with a background from Warwick University.

Quant’s leadership includes Sandeep Tandon and Sanjeev Sharma. Tandon, who has three decades of experience, was instrumental in setting up the equity derivatives desk at ICICI Securities. This background in derivatives is visible in the fund’s active management style. Ankit Pande also co-manages the scheme, bringing research expertise from both Indian and international markets.

Investors’ takeaway

Investors seeking the highest historical long-term growth typically lean toward Quant, while those valuing cost efficiency and lower price swings find Nippon more suitable. Ultimately, the choice depends on whether your priority is Quant’s higher growth ceiling or Nippon’s proven resilience and lower risk profile.

Disclaimer: The above content is for informational purposes only. Mutual Fund investments are subject to market risks. Please consult your financial advisor before investing.