NFO analysis: Motilal Oswal Multi-Asset Fund
Motilal Oswal Mutual Fund, with quarterly average assets under management of about Rs 17,230 crore for the quarter ending June 30, 2020, has come out with its new fund offer (NFO).
The fund house has launched a multi-asset fund. This scheme has started for subscription on July 15, 2020 and will end on July 27, 2020. Investors of NFO will get their allotment on July 31, 2020. The fund has been categorised under a multi-asset fund. From a taxation perspective, it will be treated as a non-equity fund and hence, you will have to wait for three years to qualify as long-term capital gains (LTCG) with indexation.
Objective: The investment objective of the fund is to generate long-term capital appreciation by investing in a diversified portfolio, comprising of equity, international equity index funds/equity ETFs, debt and money market instruments and gold exchange-traded funds (ETFs).
Strategy: The fund will invest in a mixture of equity and equity-related instruments including international funds. Besides, it will also invest in debt and money market instruments along with gold exchange-traded funds. The basic idea of a multi-asset fund is to invest in the different asset classes to have smoother investment experience. Different asset classes outperform each other at different times. So, if you are investing in a single asset class, it is not prudent as it is prone to behave inconsistently, go through its own cycles, and may not garner efficient inflation and risk-adjusted returns for investors.
The scheme’s asset allocation mix will be based on Motilal Oswal Value Index (MOVI), calculated by taking into account price to earnings (P/E), price to book (P/B), and a dividend yield of Nifty 50 Index. The MOVI is calculated on 30 daily moving averages of the above parameters. A low MOVI level indicates that the market valuation appears to be cheap and the fund may allocate a higher percentage of their investments to equity as an asset class. A high MOVI level indicates that the market valuation appears to be expensive and will reduce to the equity allocation. The asset allocation shall be reviewed twice a month based on the MOVI band.
For equity exposure, the fund will be investing in large-cap companies and will be selected based on a bottom-up approach. For fixed income, the fund will invest in papers with a high credit rating and a modified duration between three and five years. In gold, the fund will have a passive approach and will invest in gold ETF.
Fund Manager: The new scheme will be jointly managed by Fund Manager Siddharth Bothra, who will be looking on the equity part, Abhiroop Mukherjee will be looking after the debt component, Herin Visaria, will be looking after international equity and Swapnil Mayekar for gold.
Our Recommendation:
There are eight funds in this category and this will be ninth. Out of the eight existing funds, there are two funds that have assets under management of less than Rs 20 crore. On average, these funds have generated less than 2 per cent in the last year. Even the long-term performance of these funds has been around only 6 per cent.
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Funds
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Fund Manager
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AUM(in Rs. cr)
|
NAV (Rs)
|
Ret (%)1 mo
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Ret (%)3 mo
|
Ret (%)6 mo
|
Ret (%)1 yr
|
Ret (%)2 yrs
|
Ret (%)3 yrs
|
Ret (%)5 yrs
|
Standard Deviation
|
|
Axis Triple Advantage Fund-Reg(G)
|
R. Sivakumar
|
350.4
|
20.63
|
6.2
|
9.56
|
-5.5
|
3.76
|
4.36
|
5.74
|
6.06
|
20.36
|
|
Edelweiss Aggressive Hybrid Fund-Reg(G)
|
Bharat Lahoti
|
13
|
24.88
|
6.14
|
8.74
|
-9.46
|
-3
|
0.46
|
2.61
|
4.22
|
21.79
|
|
Essel 3 in 1 Fund(G)
|
Saravana Kumar
|
15.8
|
18.09
|
6.11
|
11.77
|
-6.91
|
0.31
|
2.72
|
2.99
|
4.64
|
20.68
|
|
HDFC Multi-Asset Fund(G)
|
Amit Ganatra
|
238.3
|
33.72
|
8.47
|
14.04
|
-1.93
|
4.45
|
4.03
|
4.12
|
6.11
|
19.31
|
|
ICICI Pru Multi-Asset Fund(G)
|
Sankaran Naren
|
10484.3
|
257.52
|
4.93
|
8.75
|
-9
|
-4.73
|
2.09
|
2.25
|
6.74
|
21.67
|
|
SBI Multi Asset Allocation Fund-Reg(G)
|
Gaurav Mehta
|
235.2
|
29.92
|
3.94
|
5.72
|
2.2
|
8.09
|
7.65
|
6.57
|
7.52
|
13.58
|
|
Tata Multi-Asset Opp Fund-Reg(G)
|
Rahul Singh
|
377.4
|
10.48
|
5.77
|
10.5
|
-
|
-
|
-
|
-
|
-
|
-
|
|
UTI Multi Asset Fund-Reg(G)
|
Sanjay Dongre
|
637.3
|
34.85
|
7.61
|
10.41
|
-1.23
|
3.15
|
2.45
|
2.73
|
4.09
|
20.71
|
|
Average
|
|
|
|
6.15
|
9.94
|
-4.55
|
1.72
|
3.39
|
3.86
|
5.63
|
|
If we compare category return with returns of equity fund, it is higher in both one year and five-year timeframe. Does it mean that you should invest in multi-asset funds? If we look at the ten-year period, the multi-asset category has underperformed the equity category by 1.5 per cent annually. So, if someone is trying to build wealth for the long-term, it is better to invest in pure equity funds.
There are a couple of other reasons behind our belief that one must wait before you invest in the funds. First, the asset allocation approach of the fund may create a higher expense ratio in terms of frequent shifting of the funds from debt to equity and equity to debt. This expense ratio plays a major role in your long-term performance. Second, purely based on equity valuation, one should not decide to enter or exit in debt. The unattractive equity market does not explicitly imply an attractive debt market. Therefore, our view is to remain away from NFO.