NFO Update: Motilal Oswal five year G-sec ETF

In a growing list of the launch of passively managed funds, Motilal Oswal Asset Management Company (MOAMC) has announced the launch of Motilal Oswal five year G-sec ETF. This is the fourth ETF launched by Motilal Oswal AMC apart from Nifty 50 ETF, Nifty Midcap 100 ETF and NASDAQ 100 ETF. The new fund offer (NFO) opened on November 23, 2020, and shall close by December 2, 2020.

Objective: The scheme seeks investment return that closely corresponds (before fees and expenses) total returns of the securities as represented by Nifty five-year Benchmark G-Sec Index (Underlying Index), subject to tracking error.

Strategy:  Being a passively managed fund, the scheme’s investment approach is designed to track the performance of Nifty five-year benchmark G- Sec Index. The scheme seeks to achieve this goal by investing in securities constituting Nifty five-year benchmark G- Sec Index in the same proportion as in the Index. The scheme will invest at least 95 per cent of its total assets in the securities comprising the underlying index. The scheme may also invest in money market instruments to meet the liquidity and expense requirements. The scheme may also take exposure in other G-Sec instruments for a short duration when securities of the underlying index are not readily available in needed quantities within the required timeframe or for rebalancing at the time of change in the underlying index or in case of corporate actions and accordingly, the portfolio of the scheme will be rebalanced within a period of seven calendar days.

Fund manager: The new scheme will be managed by Abhiroop Mukherjee, Fund Manager, Debt component.

Our view: Exchange-traded funds (ETF) offer investors an attractive low-cost alternative to fixed deposits. In the last one year, the benchmark the fund will be tracking has generated a return of 11.18 per cent while in five years, it has generated an annualised return of 9.49 per cent. We believe post-tax returns will be greater than what we are currently getting in bank fixed deposits. Hence, investors, who have the habit of investing in bank fixed deposits, can park their investment in the fund.