New Fund Alert: Motilal Oswal Launches High-Risk Index Targeting 70% Midcap Equity and Government Securities

New Fund Alert: Motilal Oswal Launches High-Risk Index Targeting 70% Midcap Equity and Government Securities​

Motilal Oswal Mutual Fund (MOMF) has unveiled a new passive investment vehicle, the Motilal Oswal Nifty Midcap150 Plus 8-13 yr G-Sec 70:30 Index Fund. This fund is designed to replicate the performance of its specific index while adhering to strict asset allocation rules and managing inherent tracking risks.

The scheme offers investors a long-term capital growth objective by linking returns directly to the Nifty Midcap150 Plus 8-13 yr G-Sec 70:30 Index. It serves as an opportunity for risk-aware investors seeking exposure to both volatile midcap stocks and government securities in a single mandate.

Hybrid Asset Allocation Strategy​

The core investment strategy of this fund is defined by its passive, rules-based approach. The Scheme aims to maintain investments in the constituents of the Nifty Midcap150 Plus 8-13 yr G-Sec 70:30 Index in the exact proportion as they exist in the index.

Under normal circumstances, the investment range is highly weighted towards equity. Specifically, Constituents of Nifty Midcap150 Plus 8-13 yr G-Sec 70:30 Index represent a minimum allocation of 95% to the scheme. The remainder is allocated to Debt and Money Market instruments, with an indicative maximum of 5%.

The index itself is derived from the total return versions of both the equity indices and fixed income indices. This structure allows the Scheme to benefit from diversified risk mitigation by blending midcap exposure with government debt stability.

Risk Profile and Derivatives Use​

Both the Scheme and its underlying Benchmark have been classified as Very High Risk, a crucial warning for prospective investors. The fund’s performance is subject not only to market movements but also to tracking error. Tracking Error is defined as the standard deviation of the difference between daily returns of the Underlying Index and the Net Asset Value (NAV) of the Scheme.

The AMC has designed risk control measures into the portfolio construction process. The scheme may, however, engage in derivatives for specific purposes. Total exposure towards Equity Derivatives instruments must not exceed 20% of the net assets of the Scheme. Such derivative investments are intended to be short-term and temporary.

Operational Structure and Investment Oversight​

The fund places a strong emphasis on investor transparency regarding fees and operations. The estimated aggregate fee and expenses charged to the scheme are up to 0.90% of daily net assets, covering investment management, advisory, custodial fees, marketing, and other operational costs.

Overseeing the equity component are Mr. Swapnil Mayekar (Fund Manager) and Mr. Dishant Mehta (Associate Fund Manager), both with experience exceeding a decade. The debt securities component is managed by Mr. Rakesh Shetty. This multi-faceted management structure ensures specialized oversight across different asset classes.

The investment mandate dictates that the Scheme will invest in the constituents of the Index irrespective of their individual merit, emphasizing adherence to the passive strategy principle.

Key Investment Restrictions and Guidelines​

Strict limits govern the fund's exposure as set by SEBI regulations. The fund must not exceed 10% of its NAV in debt and money market securities rated AAA. Furthermore, it cannot invest more than 10% of any company's paid up capital carrying voting rights.

The AMC has detailed guidelines regarding portfolio rebalancing. If the asset allocation deviates from the set ranges, the Fund Manager must conduct a rebalance within seven calendar days. This is done both due to short-term defensive considerations and in response to changes or corporate actions concerning the underlying index.

How to Invest​

This fund is available through two plans: the Regular Plan and the Direct Plan. Investors can subscribe with a minimum application amount of Rs 500/- for Lumpsum investments, while SIP options are also available across various frequencies including Daily, Weekly, Fortnightly, Monthly, and Quarterly.

The allotment of units during the New Fund Offer (NFO) period is set at a face value of Rs 10/- per unit. All applications are subject to realization of payment instruments, and investors must ensure that their investment method complies with all stated requirements in the Scheme Information Document.