Motilal Oswal Mutual Fund has launched its long awaited ‘Motilal Oswal Large and Midcap Fund’.
With a wide investment horizon, Motilal Oswal Large and Midcap Fund provide a plenty of room for the fund manager to try flexible investment strategies.
Does this indicate a golden opportunity for the retail investors? Discover in this review of Motilal Oswal Large and Midcap Fund.
In this article, we are going to discover,
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1. Basic Features of Motilal Oswal Large and Midcap Fund
2. A Quick Review of Motilal Oswal AMC and the Fund Manager
3. Asset Allocation of Motilal Oswal Large & Midcap Fund
4. Review of Risks in Motilal Oswal Large & Midcap Fund
5. Should You Invest in Motilal Oswal Large & Midcap Fund?
Basic Features of Motilal Oswal Large and Midcap Fund
Fund House: Motilal Oswal Mutual Fund
Issue Opens On: 27 September 2019.
Issue Closes On: 11 October 2019
Fund Type: Open-ended
Fund Category: Equity: Large & Midcap
Benchmark: BSE 200 TRI
| Basic Investment Details | |
|---|---|
| Available plans | Growth & Dividend |
| Riskometer | Moderately High |
| Minimum Investment | ₹500 (Plus in multiples of ₹1) |
| Minimum Additional Investment | ₹500 (Plus in multiples of ₹1) |
| Minimum Monthly SIP Investment | ₹500 (Plus in multiples of ₹1) |
| Minimum Instalments-Monthly SIP | 12 |
| Minimum SWP Amount | ₹500 (Plus in multiples of ₹1) |
| Expense Ratio | Up to 2.25% |
| Entry Load | Not Applicable |
| Exit Load | 1% (for redemption within 15 days) |
A Quick Review of Motilal Oswal AMC and the Fund Manager
Motilal Oswal Mutual Fund is the Asset Management Company from one of the well-known financial services companies in India, Motilal Oswal Group.
The AMC—headquartered in Mumbai—was setup on 29 December 2019. With Mr Aashish Somaiyaa as the CEO, the AMC has an AUM of ₹19694.49 Crore as of 26 September 2019.
In its decade long presence in the market, Motilal Oswal Mutual Fund is currently offering 16 mutual fund schemes excluding the upcoming Motilal Oswal Large and Midcap Fund. Out of the 16, only one fund is outperforming its index at present.
Fund Managers: Mr. Aditya Khemani and Mr. Abhiroop Mukherjee.
The Motilal Oswal Large & Midcap Fund scheme will be managed by Mr Aditya Khemani, while Mr Abhiroop Mukherjee manages the debt portion of the fund.
Even though Mr Aditya Khemani has more than a decade long experience in managing equity funds, he has started only this month with the Motilal Oswal AMC. He certainly has shown excellent performance with the funds he managed for other AMC. But, we are yet to see how his strategies fit into Motilal Oswal Mutual Fund’s vision.
On the other hand, Mr Abhiroop Mukherjee—debt component manager—has been with Motilal Oswal for a long time now. He will be crucial in the risk management of this mutual fund scheme. Currently, he is managing 7 mutual fund schemes for Motilal Oswal Mutual Fund including the Motilal Oswal Large & Midcap Fund.
Since the Motilal Oswal Large & Midcap Fund is predominantly an equity mutual fund, performance of its debt component should be of least concern. You can find the detailed asset allocation ratios of this scheme below.
Asset Allocation of Motilal Oswal Large & Midcap Fund
Since this mutual fund scheme comes under the ‘Equity: Large and Midcap’ category, it leaves bigger room for flexible asset allocation.
| Instruments | Asset Allocation % | Risk Profile | |
|---|---|---|---|
| Minimum | Maximum | ||
| Large Cap Equity Instruments | 35% | 65% | Medium to High |
| Mid Cap Equity Instruments | 35% | 65% | Medium to High |
| Equity Instruments Other Than Above | 0 | 30% | Medium to High |
| Liquid, Debt and Money Market Instruments | 0 | 30% | Low to Medium |
| Units Issued by REITs & InvITs | 0 | 10% | Medium to High |
At all times, the Motilal Oswal Large & Midcap Fund will have investments of 35% each in Large-cap and Midcap company shares.
This level of flexibility will certainly allow the fund manager to expose your investments to higher growth areas. In the meantime, it will also help in diversification of the investments.
Review of Risks in Motilal Oswal Large & Midcap Fund
The Motilal Oswal Large & Midcap Fund has the standard mutual fund investment risks including liquidity risk, trading volumes, settlement risk and default risk with potential loss of capital.
Besides, the other potential risks in Motilal Oswal Large & Midcap Fund includes but not limited to,
Market Risks: The scheme’s returns will be affected by stock market fluctuations.
Risks Associated with Investment in Equities and Equity Related Securities: These risks include Asset class risk, Selection risk, Concentration risk and Risks associated with tax and regulatory risks.
Risks Associated with Investments in Debt & Money Market Instruments: These include Interest rate risk, Credit risk, Right to limit redemption, Pre-payment risk, Spread risk, etc.
Risks Associated with Investments in REITs And InvITs: The associated risks include Risk of lower than expected distribution, Price risk, Liquidity, Market risk and Reinvestment risk.
Note: It should also be noted that investments in Midcap stocks are much volatile and riskier than investments in Large-cap stocks.
Peer Fund Review of Motilal Oswal Large & Midcap Fund
Let us take a similar existing fund from the same ‘Equity: Large & Midcap’ category to get a better understanding of its working.
| Aditya Birla Sun Life Equity Advantage Fund | |
|---|---|
| Category | Equity: Large & MidCap |
| Launch Date | 24 Feb 1995 |
| Return Since Launch | 17.08% |
| 5 Year Return | 10.50% |
| 1 Year Return | -0.15% |
| YTD | 3.13% |
| *Data as of 31 August 2019 | |
It looks this Large & midcap fund has stood the test of time. However, return over the past 5 years is only slightly better than the 9.73% of its index BSE 200 TRI.
On the other hand, Year-To-Date return of 3.13% is quite good, given the market conditions in the near past. This is an under performance compared to its index’s 5.21% YTD return.
| Risk Measures | Standard Deviation | Beta | Alpha |
|---|---|---|---|
| Fund | 15.59 % | 1.12 | -6.01 |
| Category | 14.10 % | 1.00 | -2.54 |
| S&P BSE 200 TRI | 13.10 % | – | – |
Correlating Beta & Alpha value of Fund Category Average: Even with a beta value of 1.00, Alpha shows that the funds are collectively underperforming. That is, the funds are underperforming even when the volatility is at a desired proportion.
Reviewing Risk with Standard Deviation: Here, we must notice the standard deviation of the S&P BSE 200 TRI and the category average. Even though brings high returns in the long-term, standard deviation of 14.10% is pretty high. As an investor, you must have a high risk tolerance to invest in such funds.
As you know, these performance figures are not direct indicators that the Motilal Oswal Large & Midcap Fund will perform the same way. Yet, it shows that the mutual fund schemes under this category allows the fund manager to actively avoid risks and make use of high growth opportunities when available.
Should You Invest in Motilal Oswal Large & Midcap Fund?
This Motilal Oswal Large & Midcap Fund does promise a good opportunity for the investors. Meanwhile, it also has a higher affinity for risks.
There is no second guess on this fund testing the risk tolerance of investors. Investing in this NFO would be too much experimentation—given that this Motilal Oswal Large & Midcap Fund is managed by a new fund manager for an AMC with only one better-performing fund.
Our recommendation is to AVOID THIS NFO for now.
If you want to diversify your portfolio with Large & Midcap category funds, you can always invest in funds that have good track records.
If you want to re-align your portfolio with proper investment strategy and planning, you can sign-up for our free 30-minute consultation anytime.
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