Motilal Oswal Multi Asset Fund NFO : Should you invest?
July 20203 min read
Motilal Oswal Mutual Fund has launched a new NFO with an asset allocation strategy. The NFO is called Motilal Oswal Multi Asset Fund. This New Fund Offer opened on 15th July 2020 and closes on 27th July 2020. There are a few funds in the existing mutual fund universe which follow the asset allocation strategy. However, Motilal Oswal Multi Asset Fund is different from existing fund options. So what exactly is the difference? And, Should you invest in this NFO? Let’s get into these details.
Motilal Oswal Multi Asset Fund – Fund Profile
As mentioned earlier, this fund will follow asset allocation strategies. According to the presentation of Motilal Oswal Mutual Fund, this NFO is :
A diversified multi asset fund which aims to generate long term capital appreciation by investing in multiple asset classes a with lower volatility, yet aiming for reasonable returns.
This asset allocation strategy will be achieved by investing in four major asset classes: Indian Equity, International Equity, Debt, Gold. These are the exposure limits set by the fund house for each asset classes:
- Indian and International Equity = Minimum 10% Maximum 50%
- Debt = Minimum 40% Maximum 80%
- Gold = Minimum 10% Maximum 20%
The exposures will be decided based on MOVI i.e. Motilal Oswal Value Index; which calculates whether the markets are overvalued or undervalued based on PE ratio, PBV ratio, and Dividend yield of Nifty 50 index. The Indian equity exposure in this fund will be large-cap oriented, Debt part is mainly AAA-rated bonds, International equity exposure will be taken via the S&P 500 index fund and Gold exposure will be taken via ETF.
Motilal Oswal Multi Asset Fund – Comparison with funds of a similar strategy
Some funds in the existing mutual fund universe have similar asset allocation strategies, however, Motilal Oswal Multi Asset Fund is different compared to these funds. Even though we cannot compare the performance of these funds due to the difference in strategies, we will give a glimpse of their asset breakup and taxation for easier understanding.
These are the top 5 multi-asset allocation funds based on AUM. As you can see, none of the funds have any exposure to International Equity stocks. Additionally, except SBI Multi Asset Allocation fund, every other fund follows equity taxation. That means that at all times at least 65% exposure should be in Indian equity stocks. Such a structure does not leave much space for dynamic fund management.
Motilal Oswal Multi Asset Fund follows a Non-Equity Taxation. And the fund manager can go as low as 10% in Equity exposure if the market is overvalued. Hence, we believe that such an open investment mandate can give leeway to the fund manager to deliver the performance.
Should you invest in Motilal Oswal Multi Asset Fund?
We believe that asset allocation is key to outperform the broader market and to reduce volatility in the portfolio. The whole idea behind asset allocation is to invest in assets that do not move in the same direction. For example, when equity markets do well, Gold does not give great returns, Similarly, during volatility in equity markets,, debt and gold will give much-needed stability to the portfolio.
The investment mandate and the fund profile of Motilal Oswal Multi Asset Fund are good enough to make asset allocation work effectively. In our opinion, this is a true blue asset allocation fund. The strategy of the fund is impressive and will work across market cycles. However, the execution of the asset allocation strategy is the key factor that will drive the fund performance.
Holding this one fund is essentially equivalent to holding 4 different funds of 4 different asset classes. Hence, diversification aspect is also covered in the fund’s strategy. Our recommendation is to invest but limit the exposure to this fund up to 10% in the portfolio to start with. As the fund creates a performance record and goes through different market cycles, the exposure can be increased further. However, the investment horizon for this fund needs to be 5 years or more.
Want to know more about the fund? Get in touch with our research team and get a detailed insight into the fund and its suitability.
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