Motilal Oswal NFOs may suit investors keen on passive mutual funds
Latest News: Motilal Oswal, has launched 4 mutual funds in the market, those are Motilal Oswal Asset tracking the NIfty 500, Bank Nifty, Nifty Midcap 150 and Nifty Smallcap 250. Let’s see whether it suit investors who are seeking passive mutual funds.
According to the reports, investors looking for less-price passive mutual fund schemes in their portfolio and will be considered the NFO(new fund offering) of Motilal Oswal Asset Management. Index funds follow the passive style of investing because they do not require a fund manager’s expertise to select stocks.
While passive funds that bet on indices such as Sensex, Nifty and Nifty Next 50 are available, there have been no index funds for smaller stocks. Investors, who do not want to put money in actively managed mid and small-cap funds, could opt for these products. “Till now passive investors had no choice in the mid-cap and small-cap space. Based on their risk profile, investors can consider some allocation to these funds,” says Rohit Shah, founder, Getting You rich.
At present, it will be possible for investors to construct a 100% passive portfolio covering a mix of large-cap, mid or small-cap and multi-cap oriented index funds or ETF‘s. Apart from, actively managed mid and small-cap funds charge 1.5-2.5 %of the amount invested as expense ratio, passive funds in the space charge a maximum of 1%.
It is the best scheme for investors who want to invest in the long term with an eye on low cost and who do not want to rely on fund manager skills could look at these products”, says Harshvardhan Roongta, Chief Financial Planner, Roongta Securities.
Fund Managers are estimating that it is very difficult to beat their benchmark indices. As per a report by SPIVA, in the case of mid and small-cap, the percentage of funds outperforming the S&P BSE 400 Mid Small-Cap index over 1, 3, 5 and 10-year periods is 74 percent, 43 percent, 60 percent, and 45 percent, respectively.
Restrictions on stocks that can be chosen for the portfolio have made it more challenging for mid and small-cap funds to outperform. For example, post the SEBI rule on the categorization of mutual funds, a mid-cap fund must invest 65 percent of its portfolio into stocks with rank 101 to 250 in market capitalization.
“Increasing, it is becoming difficult for fund managers to outperform the indices on a total return basis,” says Jitendra Solanki, a Sebi registered financial adviser.
Disclaimer: This post is just information about the scheme. It does not give any advice or recommendation. Mutual Fund investments are subject to market risk. Please read the offer document carefully and consult your advisor before investing.