MOSt Focused Multicap 35 Fund

An actively managed diversified equity fund which will invest in a maximum of 35 stocks across sectors and market-capitalisation levels.

Summary

Type	An open-ended diversified fund	Benchmark Index	CNX 500 Index
Min. Investment (lump sum):	Rs 5,000 and in multiples of Re 1 thereafter	Additional Investment:	Rs 1,000 and in multiples of Re 1 thereafter
Face Value	Rs 10 per unit	Expense Ratio:	Upto 2.50%*
Entry Load	Nil	Exit Load:	Nil
Issue Opens	April 07, 2014	Issue Closes:	April 17, 2014

*Direct Plan shall have a lower expense ratio to the extentof distribution expenses, commissions, etc. and no commission fordistribution of Units will be paid / charged under the Direct Plan  

Investment Objective*

The investment objective of the scheme is "to achieve long term capital appreciation by primarily investing in a maximum of 35 equity & equity related instruments across sectors and market-capitalization levels. However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved."

*Source: Scheme Information Document

 

Is this fund for you?

MOSt Focused Multicap 35 Fund (MFM 35) is an actively managed fund from the stable of Motilal Oswal Mutual Fund which will hold a diversified equity portfolio of equity and equity related instruments without a bias to any particular market capitalisation segment and sector(s), in the endeavour to achieve long term capital appreciation. But the fund while doing so, the fund will follow its mandate of holding not more than 35 stocks in its equity portfolio. So in that sense, MFM 35 is being positioned as a high-conviction oriented focused fund.

By investing in companies across market capitalisation segments, MFM 35 will have an opportunity to capitalise on investment opportunities in respective market capitalisation segment (i.e. large cap, mid cap and small cap) as when they arise; but the fund could potentially be concentrated in few market capitalisation segment / sectors which have a very low downside risk. So such a strategy may enhance the chance of generating alpha for its investors. Likewise being diversified in nature and investing across sectors, risk mitigation may be possible.

But amid times where the Indian equity market recently clocked an all-time high, portfolio construction could be challenging task because the trail P/E of the market is near stretched levels (at about 19.0 calculated on trail earnings), which in effect has lowered the margin of safety at the time of its launch. Therefore before investing one's hard earned money, it would be imperative to take into account his / her risk appetite and risk tolerance.

 

Portfolio & Investment Strategy

While building its portfolio, MFM 35 would follow an active investment style using the bottom-up approach to stock picking. It will invest across market capitalization and sectors but limit the portfolio to 35 stocks, and thereby be positioned as as a high-conviction oriented focused fund. While MFM 35 shall be benchmark agnostic with a portfolio of high conviction stock ideas from across market-capitalization levels / sectors, the portfolio stocks could be potentially concentrated in a few market capitalization levels / sectors which have very low downside risk.

While identifying stocks for its portfolio, the fund manager shall look at aspects such as:
 

• Quality of business
• Sustainability of business
• Scalability of business model
   

Thus MFM 35 intends to follow Quality, Growth & Longevity (QGL) as the key evaluation parameters. The businesses should have strong earnings growth prospects and be available at reasonable valuations.

Also, MFM 35 may invest in compelling opportunities in foreign listed securities (including ETFs and other overseas funds). Likewise, the fund may also invest in strong business franchises in the unlisted pace, with a scalable business model and available at attractive valuations.

While making investment decisions, besides the factors cited above, the impact of prevailing economic environment over the medium to long term prospects of the companies will also be taken into consideration.

The asset allocation which will be followed by the fund will be as under:

 

Instruments	Allocation Range (%)		Risk Profile High/Medium/Low
	Minimum	Maximum
Equity and equity related instruments*	65	100	High
Debt Instruments, Money Market Instruments, G-Secs, Cash, and Cash at Call, etc.	0	35	Low

*Subject to the overall limit of 35 securities
(Source: Scheme Information Document)  

MFM 35 will benchmark its performance to the CNX 500 Index. This is the appropriate index to benchmark this scheme since it's a diversified equity fund investing in equities and equity related instruments across market capitalisations.

 

Fund Manager Profile

MFM 35 will be managed by Mr Taher Badshah who is the Senior Vice Precedent and Co-head of Equities at Motilal Oswal Mutual Fund. Mr Badshah, a Bachelor of Engineering (Electronics) and Masters in Management Studies (in Finance) from the University of Mumbai, has over 18 years of work experience in equity research and fund management. Prior to joining Motilal Oswal Mutual Fund he was associated with Kotak Mahendra Investment Advisors and Prudential ICICI Asset Management Company Ltd. as a Senior Fund Manager-PMS.

At present, Mr Badshah is also a fund manager for Motilal Oswal MOSt Focused 25 (which was launched in May 2013) and Motilal Oswal MOSt Focused Midcap 30 Fund (which was launched in February 2014).

 

Fund Outlook

Following a multi-cap approach while selecting stocks for its portfolio, MFM 35 will be able to tap opportunities as when they arise in respective market capitalisation segments and sectors. However the fortune of MFM 35 Fund would depend upon timely detection of such opportunities, while it endeavours to create wealth for its investors in the long-term.

Likewise, although the portfolio stocks could be potentially concentrated in few market capitalisation levels / sectors which have a very low downside risk, as a part of its investment strategy; the fortune of the fund would be closely linked on how a conviction oriented portfolio restricted to 35 stocks fares.

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