Quest Smart Alpha Sector Rotation
Quest PMS | Equity | | AIFIME's View on Quest Smart Alpha Sector Rotation
Strategy
Open Ended AIF Focused on Sector Rotation
Investment Fund
Quest Smart Alpha Sector Rotation is an open-ended CAT III AIF that employs a flexi-cap approach, typically holding around 20-25 stocks. The fund actively engages in sector rotation, seeking out sectors experiencing tailwinds and avoiding those facing headwinds.
Fund's Strategy View
The fund would be focused on sector & stock rotation as key strategy trying to identify the right sectors & company at right time and have concentrated exposure in them. The fund has a minimum requirement of 3 sectoral themes at any point of time, with a chance 1 or 2 emerging theme which could be added. The fund can also take aggressive cash calls accordingly to the fund manager’s view on the market.
Fund Performance
We refrain from evaluating the fund since it is yet to mature (less than 5 years).
IME's View on Quest PMS
View on AMC
Quest AMC, founded by Ajay and Bharat Sheth, has added Aniruddha Sarkar to their team from IIFL. The AMC has all the ingredients - equity pedigree, experienced team, scale, well-articulated flexible philosophy and good performance track record. Investors, specifically looking for a sector rotation investment approach, could consider the AMC.
AMC's Pedigree
Quest was established in 1987 as an equity research house specialising in midcap and smallcap companies. They launched their Portfolio Management Services (PMS) in 2007 and have over 15+ years of experience managing investor money in Indian equities. They have remained focused on equities without diversifying into other business lines.
AMC Team
The Quest investment team is led by co-founder Bharat Sheth, with over 25 years of investment experience at Quest. The stability of the investment philosophy is supported by having a co-founder as the CIO. Aniruddha Sarkar, the Fund Manager, has a strong track record at IIFL and works closely with Sheth in the investment decision process. The key risk is the departure of Aniruddha, who has been a good addition to the team, given his lack of ownership in the firm.
Investment Philosophy
Quest Investment Advisors follows a multi-pronged investment approach, summarised by the acronym "QUEST" - Quality, Earnings, Sector Rotation and Timing. They employ a blend of value and growth investing styles, seeking mispriced opportunities in both segments of the market.
Investment Philosophy
Quest Smart Alpha Sector Rotation is a concentrated multi-cap strategy focussed on identifying 4 themes at a time across sectors in the market to generate alpha. The strategy aims to rotate across sectors actively to drive performance.
- Rationale for Sector Rotation: Sectoral leaders change in each market cycle (this has been seen repeatedly in the past & will also continue in the future) | Identifying the right sectors helps capture the right economic and earnings cycle thereby leading to valuation re-ratings | The typical holding period of a sector or a theme will be 6-18 months
- Sectoral Calls: There is no magic formula for getting sector calls rights | Various factors including economy + industry dynamics + mgmt comments + financials and valuations go into picking the right sector | picking the sector is 10-20% of the job ... the remaining is bottom-up
- Company Calls & Rotations: company selection within identified sectors is a major source of value-addition | all companies in a sector do not move in tandem and a large part of alpha creation is possible by smart company selection
- Exit: the strategy is focused not on just identifying and positioning for the upcycle | Exiting the sector at the right time is important and part of the philosophy (when valuations are rich)
PORTFOLIO CONSTRUCTION
- Overview: only 4 themes at any point in time (can have many sectors)
- Holdings: 3-5 stocks per theme / 15-20 stocks in the portfolio
- Cash Levels: upto 50% cash calls
Investment Strategy
Current Themes
- Agri economy recovery: food inflation + fertiliser subs -- farmer disposable income going up | sub-sectors: agri-chem + equipment (tractors) + FMCG
- India Manufacturing: PLI | sub-sectors: defence + white goods + auto ancs
- Energy security: electrification + industrialisation | sub-sectors: power gen + solar and hydrogen + RM suppliers to power gen
- 4th theme: evaluating
Trailing Performance
| 1yr | 3yr | 5yr | Since Inception | |
|---|---|---|---|---|
| Quest Smart Alpha Sector Rotation | -9.03 | 16.7 | 16.4 | |
| S&P BSE 500 | -6.6 | 14.7 | 15.4 | |
| Alpha over Broad Mkt BM | -2.4 | 2 | 1 |
Performance as of: 30-Sep-25 | Inception Date: 01-May-22 | Performance are post-fees, pre-taxes. Global funds denominated in USD or fund currency.
Investment team
Bharat Sheth | 5-star rated FM
Head Equities | 46 yrs Experience | 32 yrs at current firm
Bharat Sheth is a highly seasoned & respected investment professional, having spearheaded the growth of Quest's advisory & PMS business over the past 25 years. Being part of the core founding team, he has provided the much-needed stability and thought leadership that has helped Quest grow into one of the larger PMS providers in India.
Aniruddha Sarkar | 4-star rated FM
CIO | 17 yrs Experience | 6 yrs at current firm
Past Experience: IIFL AMC (FM)
Aniruddha joined Quest in Feb-2020, after a successful stint of over 10 years at IIFL across various roles including Fund Manager for the MF & PMS and as a research analyst.
