Globally, innovation is leading through the disruption of various traditional industries. Such innovation and disruption creates investment opportunities across geographies. These opportunities are very limited in the Indian market.
As an Indian investor, it is better to diversify globally and add some international flavour into your investment portfolio. However, many investors find it difficult to invest directly in foreign stocks as the lack of knowledge regarding entry and exit in offshore markets is a barrier.
In order to participate meaningfully in the opportunities emerging in the global markets, investors need to take exposure to several themes or emerging mega-trends outside India. For Indian investors, the best way to invest in offshore markets is through domestic Mutual Funds such as Index funds/ ETFs, which mirror the global indices or actively managed international funds.
Investors seeking to diversify their portfolio with foreign stocks, but are unaware of which international securities and sectors will help them to gain optimal returns, may consider investing in global indices that measure the performance of leading companies across sectors or themes.
Motilal Oswal Mutual Fund has launched Motilal Oswal Nasdaq Q50 ETF. It is an open-ended scheme replicating/ tracking the Nasdaq Q-50 Index. The scheme offers to participate in the international market and benefit from the growth of the next generation of innovators and leaders in disruptive technologies. The underlying index consists of the 50 largest Nasdaq-listed non-financial companies after the Nasdaq-100 Index.
Table 1: Details of Motilal Oswal Nasdaq Q50 ETF
|An open-ended scheme replicating/ tracking Nasdaq Q-50 Index.
|Exchange Traded Fund
|The Scheme seeks investment return that corresponds with (before fees and expenses) to the performance of the NASDAQ Q-50 Index subject to tracking error and forex movement. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.
|Rs 500/- and in multiples of Re 1 thereafter.
|Rs 10/- per unit
|Mr Ankush Sood
Mr Abhiroop Mukherjee
|NASDAQ Q-50 Total Return Index
|December 10, 2021
|December 17, 2021
(Source: Scheme Information Document)
The Investment Strategy for Motilal Oswal Nasdaq Q50 ETF:
Motilal Oswal Nasdaq Q50 ETF aims to track the Nasdaq Q50 index and invest in stocks in a similar proportion to generate returns in line with the underlying index. The investment strategy of this scheme would involve offering investment returns that are similar to the NASDAQ Q-50 Index before fees/expenses subject to forex movement and tracking error.
The scheme will neither try to beat the index it tracks nor will it take an active approach in times when markets seem to be over/undervalued. Being an ETF, the scheme will only invest in the security constituting the underlying index. Motilal Oswal Nasdaq Q50 ETF will aim to ensure that at no point in time it deviates from the index. The fund manager will endeavour to keep the tracking error as low as possible.
The scheme aims to invest in the constituent of NASDAQ Q50 Total Return Index, in the range of 95% to 100%. It would also invest in units of Liquid/ debt schemes, debt and money market instruments, and International Equity ETF (Victory Shares NASDAQ Next 50 ETF) in the range of 0% – 5%.
Under normal circumstances, the Asset Allocation of the scheme will be as under:
Table 2: Asset Allocation for Motilal Oswal Nasdaq Q-50 ETF
|Indicative Allocation (% of net assets)
|Equity and Equity Related Securities of NASDAQ Q-50 Index
|Liquid/ debt schemes, debt and money market instruments / International Equity ETF (VictoryShares Nasdaq Next 50 ETF)
|Low to Moderate
(Source: Scheme Information Document)
About the benchmark
The Nasdaq Q50 Index is designed to measure the performance of 50 of the largest Nasdaq-listed non-financial companies after the Nasdaq-100 Index. Nasdaq Q-50 Index provides exposure to disruptive mid-cap companies. Stock selection is be based on the 50 largest companies after the Nasdaq 100 (based on modified market capitalisation). Sectoral weights in the Nasdaq Q-50 Index will be rebalanced quarterly.
The following is the list of the top 10 constituents and sectors in the index by their weightage as of November 30, 2021:
Who will manage Motilal Oswal Nasdaq Q-50 ETF?
Mr Ankush Sood and Mr Abhiroop Mukherjee will be the dedicated fund managers for this scheme.
Mr Ankush Sood will be managing the equity portion of this portfolio. He holds B.Tech in Electronics & Telecommunications from MPSTME, NMIMS Mumbai and an MBA(Tech) with a Major in Finance & Minor in Analytics from SBM, NMIMS Mumbai.
His prior experience is prominently in Institutional Sales Trading Function. Before joining Motilal Oswal AMC he was associated with Motilal Oswal Financial Services Limited (MOFSL), wherein he was primarily responsible for Servicing Domestic & Foreign Institutional Clients. At Motilal Oswal AMC, Mr Sood currently manages Motilal Oswal S&P 500 Fund, Motilal Oswal Nasdaq 100 ETF, Motilal Oswal Flexi Cap Fund and Motilal Oswal Multi Asset Fund.
Mr Abhiroop Mukherjee will be managing the debt portion of the portfolio. He holds B.Com (Honours) and PGDM (Finance) degrees and has over 13 years of experience in debt & money market securities trading and fund management.
Mr Mukherjee has worked as an Associate Vice President – Debt and Money Market Instruments at MOAMC from May 2011 onwards and before that with PNB Gilts Ltd. as Assistant Vice President – Debt and Money Market Instruments.
At Motilal Oswal AMC, Mr Mukherjee currently manages Motilal Oswal Ultra Short Term Fund, Motilal Oswal Liquid Fund, Motilal Oswal 5 Year G -Sec ETF, Motilal Oswal 5 Year GSec Fund of Fund, Motilal Oswal Focused 25 Fund, Motilal Oswal Midcap 30 Fund, Motilal Oswal Flexicap Fund, Motilal Oswal Long Term Equity Fund, Motilal Oswal Dynamic Fund, Motilal Oswal Nasdaq Fund of Fund and Motilal Oswal Equity Hybrid Fund.
Fund Outlook – Motilal Oswal Nasdaq Q-50 ETF
Motilal Oswal Nasdaq Q50 ETF will track the Nasdaq Q50 Index to generate returns that commensurate with the performance of the index, subject to tracking errors. The scheme offers investors international exposure to emerging disruptive companies, has a low correlation with Indian equities and could benefit from Indian currency depreciation.
The underlying index offers exposure to additional disruptive companies beyond the established, Mega cap and Large-cap leaders in the Nasdaq-100 Index. Accordingly, the scheme allows you, the investors to participate in such mega and large foreign stocks and include them in their portfolio.
However, do note that along with global exposure and investment in emerging opportunities with the next generation of innovators, the scheme will be prone to a certain level of risk. The scheme will passively invest in international equities, which could be highly risky. It also carries geopolitical risk and currency fluctuation risk.
Although the underlying index has a lower correlation to Indian equities, the recent emergence of the ‘Omicron’ (a new variant of the coronavirus) classified as ‘variant of concern’ and ‘high-risk’ by the WHO (World Health Organisation), and raised concerns around several parts of the world; could have a bearing on the fund’s performance. The margin of safety appears to be narrow at these elevated levels of the equity market and going forward volatility is likely to intensify. There is no clear direction for the equity market in the near term.
Being an ETF scheme, the fortune of Motilal Oswal Nasdaq Q50 ETF will rely on the performance of the underlying index. It has been launched when the equity markets have retraced a bit, but the risk as such has not reduced. You must ensure that you have a higher risk appetite and a long investment horizon of at least 5 years to sustain the various market cycles.
This article first appeared on PersonalFN here