Motilal Oswal – Vision 2030 Fund Review – Should you Invest in this AIF?

Equity as an asset class is an inevitable portion of everyone’s portfolio.

In recent times, investing in equity is not just limited to investing in listed stocks & equity mutual fund schemes.

The scope for equity investing has widened. One such option is Alternate Investment Funds (AIF). In the earlier article, we reviewed “AIF – an open-ended category III AIF – Motilal Oswal – Next Trillion Dollar Opportunities Portfolio.” 

Refer to the above-mentioned article to have an overview of AIF & features of Category III AIF.

Motilal Oswal – Vision 2030 fund comes under the category III AIF. 

Let us analyse the features, investment strategy, and fee structure of the Motilal Oswal – Vison 2030 fund to determine if it is a worthy investment.

Table of Contents:

1.) What is Motilal Oswal – Vision 2030 Fund?

2.) Features of the Motilal Oswal – Vision 2030 Fund

3.) The Investment strategy of the Motilal Oswal – Vision 2030 Fund

4.) Fee Structure of the Motilal Oswal – Vision 2030 fund

5.) Taxation of the Motilal Oswal – Vision 2030 Fund

6.) The Triple filter Test for the Motilal Oswal – Vision 2030 fund

• Filter 1: Is the ‘Motilal Oswal – Vision 2030 Fund’ Well Regulated?
• Filter 2: Does the ‘Motilal Oswal – Vision 2030 fund’ have a Good Track Record?
• Filter 3: Is the ‘Motilal Oswal – Vision 2030 Fund’ simple and transparent?

7.) Final Verdict

What is Motilal Oswal – Vision 2030 Fund?

Motilal Oswal – Vision 2030 fund is a close-ended category III AIF. The Next Trillion Dollar opportunity Portfolio also comes under the AIF category III. But the latter is an open-ended Scheme. 

The open-ended scheme has no limit on the number of units/ shares. Whereas in a close-ended scheme only a set of shares /Units are issued. 

A closed-end fund is launched through an initial public offering (IPO) in order to raise money for investment. After that period passes, investors can’t subscribe to the same.

Features of the Motilal Oswal – Vision 2030 Fund:

Motilal Oswal Private Equity (MOPE) is looking to raise private equity funds from domestic and global investors. 

Let us take a look at its basic features below to better understand the working of this product.

Name of the Scheme	Motilal Oswal Vision 2030
Type	Category III, Close-ended Scheme
Tenure	6 years from the final closing
	with 2 years extension subject to approval
No. of Stocks	Up to 30 stocks Inclusive of Unlisted
Market Cap	Flexi – Invest across market cap
Bench Mark	Nifty 500
Initial drawdown	30% of capital commitment &
	balance at the discretion of the Investment manager
Lock in	24 months from the final closing
Exit Load	>2 & <3 years – 3%
	>3 & <4 years – 2%
	>4 & <6 years – 1%
	>6 years – NIL

The Investment strategy of the Motilal Oswal – Vision 2030 Fund:

• It invests in companies with strong QGLP – Quality, Growth, Longevity & Price.
• The investor has the flexibility to invest ~20% in other bottom-up stock opportunities
• It invests in the early-stage companies, pre–IPOs, at the time of DRHP filing; near IPO through anchor allocation.

Fee Structure of the Motilal Oswal – Vision 2030 fund:

Based on the investment amount & investment mode, which could be either Lump sum or SIP, the fee structure of Motilal Oswal – Vision 2030 fund varies.  

The following table depicts the fee structure for various categories of investors.

Lump sum class	SIP Class	Min Capital Commitment (Rs Cr.)	Management Fees
B1	B5	2<5	2.50%
B2	B6	5<10	1.75%
B3	B7	10<25	1.50%
B4	B8	>=25	1.25%

A point to be noted here is that B4 and B8 are eligible for Co-investment in Unlisted Equity.

Apart from the fixed management fee, there is also an exit load for early redemption. Funds are locked for a minimum of 2 years.

• Two to Three years – 3%
• Three to four years – 2%
• Four to six years – 1%. 

There is no exit load after 6 years.

Taxation of the Motilal Oswal – Vision 2030 Fund:

Category III of AIF is taxable at the fund level. This has no pass-through status. 

The highest rate of tax (as per the current tax slab) is charged on the profit made by this fund. 

The tax is discharged by the fund on behalf of the investors. So, investors do not have to pay additional taxes separately. 

Tax on both realized and unrealized gains is factored in the NAV on an ongoing basis. Thus, it is a post-tax post-management fee NAV.

The rate at which a Cat III fund pays tax on each of these types of income is explained in the table below: (As per Budget of the Financial Year 2021-22)

Nature of Income earned by the Fund	Period	Maximum Marginal Rate (MMR)
Short Term Capital gains	Up to 12 months	17.94%
Long Term Capital gains	> 12 months	11.96%
Dividend Income	–	35.88%
Unlisted – Long Term Capital gains	> 24 months	28.50%
Unlisted – Short Term Capital gains	Up to 24 months	42.74%
Unlisted becoming listed	As per listed	Criteria same as a listed security

The Triple filter Test for the Motilal Oswal – Vision 2030 fund:

Be it any investment, it is important to test whether this investment is worthy of our money or not.

You can test the quality of this product by putting them through 3 tests or filters.

As Motilal Oswal – Vision 2030 fund is a close-ended fund we have limited sources of information. 

Still, with the information available to us, let us analyse the fund under 3 filters or 3 simple questions regarding its;

• Regulation
• Track record
• Transparency

If Motilal Oswal – Vision 2030 fund passes through this test, then you can add this fund to your portfolio.

So, let us begin.

Filter 1: Is the ‘Motilal Oswal – Vision 2030 Fund’ Well Regulated?

Regulation of an investment product is an obvious factor, which makes the investor, trust their money with the product to invest in.

But it is also one of the most overlooked ones.

Generally, the Securities Exchange Board of India (SEBI) regulates all AIFs. AIFs are defined in the Securities and Exchange Board of India (Alternative Investment Funds) Regulations, 2012. 

The AIF Regulations regulate the registration, operation, and winding up of the AIFs. The AIF must comply with the reporting requirements as stated by the SEBI from time to time. 

The AIF must intimate any material changes to SEBI within a reasonable time.

Even though it is registered with SEBI, it is still not strictly regulated by the stringent rules of SEBI as it is with Equity Mutual Funds.

If you are thinking about why stringent regulations like Equity Mutual Funds should matter?

It matters because Motilal Oswal – Vision 2030 fund is a close-ended scheme. So, any dispute in the future or change in the regulation of the AIF category III or any other norms changed by SEBI will have an adverse effect. In such scenarios, there is no easy liquidity option.

Filter 2: Does the ‘Motilal Oswal – Vision 2030 fund’ have a Good Track Record?

Only after the fund is fully subscribed, the fund starts its operation. 

This is similar to New Fund Offer (NFO) in a mutual fund scheme. 

There is no past performance for comparison. 

But earlier Motilal Oswal raised private equity in a close-ended option. 

Let us look at the performance of such funds, to estimate the potential return from this investment.

Motilal Oswal Private Equity (MOPE) – Performance Track Record:

Particulars	Fund I	Fund II	Fund III
	INR 550 Cr	INR 1,000 Cr	INR 2,300 Cr
Vintage	2007	2013	2018
Investments	13	11	9
Exits	13 (fully exited)	1 complete	90% (committed)
Portfolio Gross IRR	26.80%	-18.10%	45.60%

The earlier funds have a wide range of returns ranging from 18% to 45%. 

This clearly shows that there is no consistency in the performance of similar nature of funds. 

Comparably Equity Mutual Funds have a long past track record of it outperforming the market by delivering consistently better returns at regular intervals in the long term.

Filter 3: Is the ‘Motilal Oswal – Vision 2030 Fund’ simple and transparent?

Though SEBI has regulated the AIFs in disclosing materialistic information to investors, these metrics are sometimes full of jargon. 

This makes it a complex process to understand the working of the fund for the investors. 

There is no consolidated data available for investors to better understand how the fund actually works. 

Large institutional investors have a team of qualified managers to analyse the performance every now & then. 

This can be considered a major drawback for retail investors. This lack of transparency might suit only sophisticated investors with an extremely high-risk tolerance.

Whereas Equity Mutual Funds have complete transparency about the direct working of its fund which keeps the investor in the loop making it a safe investment compared to AIF investments.

Final Verdict:

Investing in Motilal Oswal – Vision 2030 fund is similar to investing in the Initial public offering or New Fund Offer. 

The investors have no clue about anything. 

They have to wait & watch whether it is an unstable stake of cards or actually a trump card.

From our observations from analysing this fund in detail, we can point out that;

Motilal Oswal – Vision 2030 fund has a

• Quality, Growth, Longevity & Price – QGLP investment strategy.
• Fixed management fee & Exit load.
• No past performance for comparison.
• Limited regulation by SEBI.
• Inconsistent track record of similar funds.
• Limited source of metrics for analysis.

So as per our assessment, ‘Motilal Oswal – Vision 2030 Fund has not passed the fundamental triple filter test.

The bottom line is all investment has risk; you cannot eliminate risk.  

The correlation between the risk & return matters the most. 

Generally, the higher the potential return of an investment, the higher the risk. 

But there is no guarantee in an AIF like Motilal Oswal – Vision 2030 Fund that you will get a higher return for the enormous amount of risk underlying in these types of investments.

If you have any comments or questions, write them in the comment box below.

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