Edelweiss funds ready for shock of markets.
Edelweiss Asset Management Company has conducted a recent stress test of its mutual fund schemes.
What were the results?
Their findings support the resilience of both the Edelweiss Small Cap Fund and the Edelweiss Mid Cap Fund in case of a market downturn.
How Fast Can They Liquidate?
That, in essence, is the question the stress test tried to answer: that is, how fast the funds can sell off their assets in a market selloff.
Here’s what they found:
- Edelweiss Small Cap Fund: It can liquidate 50% in three days and 25% in two days.
- Edelweiss Mid Cap Fund: It can liquidate 50% portfolio in two days, 25% in one day.
Expert View:
Nirav Karkera, Head of Research at Fisdom said, “These results clearly indicate the robust risk management practices of Edelweiss Mutual Fund.”. The liquidity profile appears highly favorable and is expected to re-affirm investor faith in the funds,” he says.
Why the Stress Test?
The Securities and Exchange Board of India expressed its concern over rapid growth in the mid-cap and small-cap segments. Following this, the Association of Mutual Funds in India asked fund houses to conduct stress tests and publish the results every fortnight.
Quant Mutual Fund Also Publishes Results:
Quant Mutual Fund has joined Edelweiss in publishing its stress test data, with its results showing that its Quant Mid Cap Fund can liquidate 50% of its portfolio in six days and the Quant Small Cap Fund in 22 days.
Getting into Details:
What is important to note is that AMFI’s methodology for these stress tests ignores the 20 percent least liquid securities in a portfolio. The tests also assess investor concentration and asset allocation, volatility, and beta.
Key Takeaways:
- What these stress tests do is give an overview to the investor of what kind of liquidity he’s going to have from a mutual fund investment amid turbulence.
- At Edelweiss, funds fared relatively better on the liquidation time frame, which would give investors more confidence.
- Outing these results empowers transparency by giving investors an informed choice in their investment decisions within portfolios.
