While planning your investment portfolio, it is essential to choose the right asset allocation to improve and stabilise the portfolio’s performance. Most investors try to invest in schemes of an asset class that performs better individually, but with changing market dynamics, the performance of each asset class fluctuates and influences the portfolio’s performance.
Whereas, a multi-asset fund or asset allocation fund aims to invest in different asset classes under one scheme and increases/decreases its allocation depending on market conditions. This kind of fund gives you exposure to various asset classes like equity, debt, international equities, and gold which saves you the cost, time, and effort of investing in multiple schemes that are aligned to these asset classes.
The objective of these funds is to enhance the performance and diversify the risk of an investment portfolio through asset allocation across various classes. Mainly, asset allocation is about the weightage you choose to give for investment across several asset classes to generate better risk-adjusted returns.
For investors, who are uncertain on how to allocate the investments in different asset classes, the strategy of multi-asset allocation under a single scheme will be beneficial for your investment portfolio.
Motilal Oswal Mutual fund has launched two schemes Motilal Oswal Asset Allocation Passive FoF – Aggressive and Motilal Oswal Asset Allocation Passive FoF – Conservative to provide investors with an opportunity to invest in passive funds across various asset classes under any of the above schemes as per the risk profile, investment horizon, and investment goals.
The fund house is of the view that in current market scenario, where domestic and international equity is at all-time highs, debt yields are low, and gold being a better performing asset class in 2020, a multi-asset solution will be a low-risk way of deploying capital. These schemes are open-ended FoF investing in passive funds, with low-cost and will deliver good returns in most market conditions.
Table 1: Details of Motilal Oswal Asset Allocation Passive Fund of Fund
| Type | An open ended fund of fund scheme investing in passive funds | Category | Fund of Funds |
| Investment Objective To generate long term growth/capital appreciation by offering asset allocation investment solution that predominantly invests in passive funds such as ETF/Index Funds of equity and equity related instruments (domestic as well as international), fixed income and Gold. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved. |
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| Min Investment | Rs 500 and in multiples of Re 1 thereafter | Face Value | Rs 10/- per unit |
| Investment Plans | Motilal Oswal Asset Allocation Passive Fund of Fund – Aggressive Motilal Oswal Asset Allocation Passive Fund of Fund – Conservative |
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| Plans |
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Options | Growth |
| Entry Load | Not Applicable | Exit Load |
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| Fund Manager |
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| Benchmark Index Aggressive Plan– 60% Nifty 500 TRI + 20% S&P 500 TRI (INR) + 5% Domestic Price of Gold + 15% Nifty 5 Year Benchmark G-Sec Index Conservative Plan– 25% Nifty 500 TRI + 10% S&P 500 TRI (INR) + 5% Domestic Price of Gold + 60% Nifty 5 Year Benchmark G-Sec Index |
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| Issue Opens: | February 19, 2021 | Issue Closes: | March 05, 2021 |
(Source: Scheme Information Document – MOFAAPFOF Aggressive
: Scheme Information Document – MOFAAPFOF Conservative)
What will be the Investment Strategy for Motilal Oswal Asset Allocation Passive Fund of Fund?
Motilal Oswal Asset Allocation Passive FoF adopts an investment strategy that benefits from the portfolio of historically non-correlated assets classes, i.e. domestic equity, international equity, Debt (G-Sec), and commodities (gold). The fund will aim to get exposure from each asset class via passive funds to maintain a low cost, diversify the assets as per risk appetite and investment goal of the investor.
The Fund house has launched two different schemes, Aggressive plan and Conservative plan for investors with various risk profiles. The fund manager aims to provide aggressive (i.e. overweight to domestic equity) exposure and conservative (i.e. overweight to debt) exposure respectively, using above asset classes, in order to generate capital appreciation over medium to long term.
Being a Fund of Fund, Motilal Oswal Asset Allocation Passive FoF will follow the passive investment strategy for investment in underlying mutual schemes as per the aggressive or conservative plan and each plan has a distinct asset allocation pattern.
How will Motilal Oswal Asset Allocation Passive Fund of Fund allocate its asset?
Motilal Oswal Asset Allocation Passive FoF is mandated to invest minimum 95% of its assets in the units of specified schemes of mutual fund and the scheme may invest up to 5% of its corpus in units of liquid schemes and money market instruments in order to meet the liquidity requirement from time to time.
Under normal circumstances the asset allocation will be:
Table 2: Asset Allocation for MOFAAPFOF
| Instrument | Indicative Allocation(% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Units of specified schemes of Mutual Fund* | 95 | 100 | Medium to High |
| Units of Liquid schemes/Money Market Instruments | 0 | 5 | Low to Medium |
(Source: Scheme Information Document – MOFAAPFOF Aggressive
: Scheme Information Document – MOFAAPFOF Conservative)
*Units of specified schemes of Mutual Fund – Aggressive plan:
| Instrument | Indicative Allocation(% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Domestic Equity – Motilal Oswal Nifty 500 Index Fund / Motilal Oswal M50 ETF / Similar Domestic Equity Passive Funds | 40 | 90 | High |
| International Equity – Motilal Oswal S&P 500 Index Fund / Motilal Oswal NASDAQ 100 ETF | 10 | 30 | High |
| Debt – Motilal Oswal 5 Year G – Sec ETF / Similar Domestic G-Sec Passive Funds | 0 | 40 | Low to Medium |
| Commodity – ICICI Prudential Gold ETF / Similar Domestic Gold Exchange Traded Funds | 0 | 20 | Medium |
(Source: Scheme Information Document – MOFAAPFOF Aggressive)
*Units of specified schemes of Mutual Fund – Conservative plan:
| Instrument | Indicative Allocation(% of net assets) | Risk Profile | |
| Minimum | Maximum | High/Medium/Low | |
| Domestic Equity – Motilal Oswal Nifty 500 Index Fund / Motilal Oswal M50 ETF / Similar Domestic Equity Passive Funds | 0 | 40 | High |
| International Equity – Motilal Oswal S&P 500 Index Fund / Motilal Oswal NASDAQ 100 ETF | 0 | 20 | High |
| Debt – Motilal Oswal 5 Year G – Sec ETF / Similar Domestic G-Sec Passive Funds | 40 | 90 | Low to Medium |
| Commodity – Nippon India ETF Gold BeES, ICICI Prudential Gold ETF / Similar Domestic Gold Exchange Traded Funds | 0 | 20 | Medium |
(Source: Scheme Information Document – MOFAAPFOF Conservative)
Who will manage the Motilal Oswal Asset Allocation Passive Fund of Fund?
Motilal Oswal Asset Allocation Passive Fund of Fund will be managed by Mr Swapnil Mayekar for equity investments, including overseas Index/ETFs & Gold passive funds; Mr Abhiroop Mukherjee for debt component; and Mr Herin Visaria for international equity.
Mr Swapnil Mayekar is Associate Vice President – Fund Manager at Motilal Oswal Asset Management Company Ltd. and he has over 11 years of experience in fund management andproduct development. Prior to this, Mr Mayekar was working with Business Standard as Research Associate.
His qualification includes, M.com (Finance Management) and currently the funds he manages are; Motilal Oswal Nasdaq 100 Fund of Fund, Motilal Oswal Nifty Bank Index Fund, Motilal Oswal Nifty 500 Fund, Motilal Oswal Nifty Midcap 150 Index Fund, Motilal Oswal Nifty Small cap 250 Index Fund, Motilal Oswal Midcap 100 ETF, Motilal Oswal M50 ETF, Motilal Oswal Nifty 50 Index Fund, Motilal Oswal Nifty Next 50 Index Fund.
Mr Abhiroop Mukherjee is Associate Vice President – Fund Manager Fixed Income at Motilal Oswal Asset Management Company Ltd. and he has over 13 years of experience in Debt and Money Market Instruments Securities trading and fund management. Prior to this, Mr Mukherjee was working with PNB Gilts Ltd. as Assistant Vice President – Fixed Income.
His qualification includes, B.com and PGDM (Finance).He currently manages these funds-Motilal Oswal Ultra Short Term Fund and Motilal Oswal Liquid Fund, for debt component Motilal Oswal Focused 25 Fund, Motilal Oswal Midcap 30 Fund, Motilal Oswal Flexicap Fund, Motilal Oswal Long Term Equity Fund, Motilal Oswal Dynamic Fund and Motilal Oswal Nasdaq Fund of Fund, Motilal Oswal Equity Hybrid Fund, Motilal Oswal S&P 500 Fund and Motilal Oswal Multi Asset Fund.
Mr Herin Visaria is Fund Manager – International Equity at Motilal Oswal Asset Management Company Ltd. and he has over 11 years of experience. Prior to this, Mr Visaria was associated with Motilal Oswal Securities Limited in Institutional Derivatives Research, Religare Capital Markets Ltd in Institutional Derivatives Dealing and Bank of Baroda Capital Markets Ltd. in Institutional Sales.
He has a B.com and the funds he manages are Motilal Oswal Nasdaq 100 ETF and Foreign Securities under Motilal Oswal Flexicap Fund, Motilal Oswal S&P 500 Fund.
Fund Outlook – Motilal Oswal Asset Allocation Passive Fund of Fund
The scheme offers two options under Motilal Oswal Asset Allocation Passive Fund of Fund – aggressive and conservative, with each option there is different asset allocation pattern. Being a FoF, it will invest in other passive mutual funds of various asset classes.
The fund will invest in low correlated asset classes viz. domestic equity, international equity, debt, and gold. This diversification will significantly reduce the risk of market volatility since no two asset classes underperform at the same time.
In addition, if an investor is seeking a moderate portfolio option, they could simply combine both the schemes (50:50), i.e. aggressive and conservative. With various options available under mutual funds, this particular scheme provides multiple benefits under a single fund for investors.
The advantage of investing in FoF is that it invests in passive funds at lower expense ratios and curbs any behavioural biases of the fund manager. In this way, the fund performance will depend on the performance of the underlying schemes.
Usually investors switch between funds to adjust the asset allocation, which leads to capital gains tax because a switch is treated as redemption of funds. But, this scheme is tax-efficient as it has an in-built portfolio rebalancing in place which helps assets stay in line with the target allocation. Notably, the fund will be treated as debt fund for taxation purpose.
As an investor before investing in any of the two funds, you must assess your risk appetite, investment horizon, and investment goals and the fund’s suitability in your overall asset allocation plan.
This article first appeared on PersonalFN here
