Hello Readers!

Motilal Oswal AMC recently announced a new NFO offer of a fund of fund (FoF) named Motilal Oswal Asset Allocation Passive FoF. This NFO was open for subscription on 19^th February 2021 and will be closed for subscription on 5^th March 2021.

This new NFO is all concentrated over the objective of Asset allocation. We know, Asset Allocation is all about how much investments that investor will invest across different asset classes. For many, asset allocation becomes tough to work as many of them fail to analyze how much to invest and in how many asset classes are the most suitable asset allocation strategy for them. Thus, to resolve this issue of investors Motilal Oswal came up with this FoF NFO!  

About Motilal Oswal Asset Allocation Passive FoF!

The new NFO has both the options, that is aggressive and conservative. The difference between the asset allocation strategy or pattern for both the options is that the equity portion is more for the aggressive option and the debt portion is more for the conservative option. Both are fund of funds (FOF); they will invest in another mutual fund (MF) schemes.

The pattern for aggressive fund asset allocation will be 50 percent in Indian equities, 20 percent in international stocks, 20 percent in debt, and 10 percent in gold. While for conservative funds the asset allocation strategy will be 30 percent in Indian equities, 10 percent in overseas shares, 50 percent in debt, and 10 percent in gold.

AMC stated that the asset allocation mentioned above will not change, however, the fund house will carry out the process of rebalancing the allocation once a quarter if the underlying weights change by five percent or more.

Positive Point Of The New NFO!

The new NFO being a passively managed fund will include low fund manager risk and low overall cost. Periodic rebalancing as mentioned by the AMC adds one more positive point.

Asset classes chose for asset allocation have a correlation among themselves that establishes the fact that your portfolio is adequately diversified.

Asset classes have been chosen in order to generate optimal returns. Investment in gold helps reduce portfolio volatility in turbulent times and government securities carry no credit risk for investors. The fund’s investments in fixed income will only be done through Motilal Oswal Nifty's five-year benchmark G-sec index fund. And its allocation to the Nifty 500 index fund ensures some presence of mid and small-cap stocks.

Negative Points Of The New NFO!

Being a passively managed fund, it is obvious that this fund will generate returns that would be in the line of underlying assets, that is the performance of this fund will try to match the benchmark index but will not beat that index.

Experts advise that this fund is best suitable for those investors who are looking to invest in line with the underlying asset allocation of the schemes. But to those investors who are actively participated in customizing their portfolio by allocating their assets as per their own investment needs using a mix of passively and actively managed funds are advised that this new NFO is of no use to you.  

G-sec investment exposes the investor to interest rate risk, especially in times when the yields move up quickly.

Who Should Invest In It?

Well, this fund is a good option who find it difficult to build their customized portfolio and prefer passively managed funds. To them, this fund will help them optimize returns over a longer time by taking an asset allocation approach.

However, it is important for an investor to understand that being a passively managed fund, can generate modest returns when the equity portion of this fund that is small and mid-cap funds don’t do well. So basically, decide to invest in this fund when you aim to invest a substantial portion of your investments in this scheme, only then investing in this fund will bring a noticeable change in your overall portfolio.

Keep reading for more updates on Mutual Fund Investment!!

For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.

Happy Investing!

(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).