Motilal Oswal MOSt Focused Long Term Fund

An actively managed open-ended Equity Linked Savings Scheme (ELSS) with a 3 year lock-in, offering tax benefit under Section 80C of the Income-Tax Act, 1961.

Summary

Type	An open ended equity linked saving scheme with a 3 year lock-in	Benchmark Index	CNX 500 Index
Min. Investment (lump sum): Additional purchase:	Rs 500 and in multiples of Rs 500 thereafter Rs 500 and in multiples of Rs 500 thereafter	Min. instalment amount (Systematic Investment Plans)	Rs 500 (weekly / fortnightly / monthly / quarterly frequency) and in multiples of Rs 500 thereafter.
Face Value	Rs 10 per unit	Expense Ratio:	Upto 2.50%* *Direct Plan shall have a lower expense ratio to the extent of distribution expenses, commissions, etc. and no commission for distribution of Units will be paid / charged under the Direct Plan
Entry Load	Nil	Exit Load:	Nil
Issue Opens	December 26, 2014	Issue Closes:	January 15, 2015

 

Investment Objective*

The investment objective of the scheme is “to generate long-term capital appreciation from a diversified portfolio of predominantly equity and equity related instruments. 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?

There are number of Equity Linked Savings Schemes (ELSS) available for investors to avail to tax deductions. And, now that the time to file tax returns is approaching, here is another one from Motilal Oswal Mutual Funds. Given that, there are so many tax saving funds, you must be wondering is this new fund worth investing your hard-earned money. Let us delve deeper into the fund to understand this.

Motilal Oswal MOSt Focused Long Term Fund (MOStFLT) 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, in the endeavour to achieve long term capital appreciation. While doing so, the fund will invest across asset classes, sectors and capitalisation levels. Thus, by investing in companies across market capitalisation segments like any other existing ELSS fund in the market, MOStFLT will follow a fluid investment style facilitating it to tap opportunities in the large cap, mid cap and small cap domain and across sectors as and when they arise. So, by holding a diversified portfolio, 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 21.2 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 Strategy

While building its portfolio, MOStFLT would follow an active investment style using the bottom-up approach to stock picking. While investing, the fund would lay emphasis on high quality / high and sustainable growth companies. While MOStFLT shall be benchmark agnostic with a portfolio of high conviction stock ideas from across market-capitalization levels / sectors, the portfolio could be potentially concentrated in a few market capitalization levels / sectors which have a 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 model; and
• Scalability of business model
   

Thus, MOStFLT intends to follow Quality, Growth, Longevity and Price (QGLP) as the key evaluation parameters. The businesses should have strong earnings growth prospects and be available at reasonable 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	80	100	High
Debt Instruments, Money Market Instruments, G-Secs, Cash, and Cash at Call, etc.	0	20	Low

(Source: Scheme Information Document)  

MOStFLT 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 and sectors.

 

Fund Manager Profile

MOStFLT will be managed by Mr Gautam Sinha Roy, who is the Vice President at Motilal Oswal Mutual Fund. Mr Sinha Roy, a Bachelor of Engineering (Honours) and Post Graduate Diploma in Management from IIM-Kolkata; has close to 11 years of work experience in fund management and investment research. Prior to joining Motilal Oswal Mutual Fund, he was associated with Motilal Oswal Securities Ltd., IIFL Capital Pte. Ltd, Mirae Asset Global Investments (India) Pvt. Ltd., Edelweiss Capital Ltd., Genpact Ltd. and Bennett, Coleman & Co. Ltd., among others.

At present, Mr Gautam Sinha Roy is also a fund manager for Motilal Oswal MOSt Focused Multicap 35 Fund (which was launched in April 2014).

 

Fund Outlook

MOStFLT aims to tap opportunities across market capitalisation and sectors. But proclivity to a respective market capitalisation and the stock picking therein, would determine the performance of MOStFLT . The launch of MOStFLT has come at a time when valuations seem stretched in the upbeat sentiment of the Indian equity market, where the trail P/E of CNX Nifty is floating over the mark of 21.0. Hence, portfolio construction can be a challenging task.

Now, how the fund uses the 3-year lock in period and constructs its portfolio would define the returns of the portfolio in MOStFLT ’s endeavour to achieve capital appreciation for its investors.

 

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