Motilal Oswal Asset Management Company Ltd. (MOAMC) is a public limited company incorporated under the Companies Act, 1956 on November 14, 2008, having its Registered Office at 10th Floor, Motilal Oswal Tower, Rahimtullah Sayani Road, Opposite Parel ST Depot, Prabhadevi, Mumbai - 400025.
Motilal Oswal Asset Management Company Ltd. has been appointed as the Investment Manager to Motilal Oswal Mutual Fund by the Trustee vide Investment Management Agreement (IMA) dated May 21, 2009, executed between Motilal Oswal Trustee Company Ltd. and Motilal Oswal Asset Management Company Ltd.
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Motilal Oswal Dynamic Fund (Div-A) - 12.7942Motilal Oswal Dynamic Fund (Div-Q) - 11.9845Motilal Oswal Dynamic Fund (G) - 13.6015Motilal Oswal Dynamic Fund-Dir (Div-A) - 13.0801Motilal Oswal Dynamic Fund-Dir (Div-Q) - 11.9774Motilal Oswal Dynamic Fund-Dir (G) - 14.2482Motilal Oswal Equity Hybrid Fund - Direct (G) - 12.3611Motilal Oswal Equity Hybrid Fund - Regular (G) - 11.9456Motilal Oswal Focused 25 Fund - Direct (D) - 18.6683Motilal Oswal Focused 25 Fund - Direct (G) - 27.1944Motilal Oswal Focused 25 Fund (D) - 16.936Motilal Oswal Focused 25 Fund (G) - 24.5787Motilal Oswal Large and Midcap Fund - Dir (D) - 10.26Motilal Oswal Large and Midcap Fund - Dir (G) - 10.26Motilal Oswal Large and Midcap Fund (D) - 10.0748Motilal Oswal Large and Midcap Fund (G) - 10.0747Motilal Oswal Liquid Fund - Direct (Div-D) RI - 10.0077Motilal Oswal Liquid Fund - Direct (Div-F) RI - 10.0072Motilal Oswal Liquid Fund - Direct (Div-M) - 10.0584Motilal Oswal Liquid Fund - Direct (Div-Q) - 10.0316Motilal Oswal Liquid Fund - Direct (Div-W) RI - 10.0087Motilal Oswal Liquid Fund - Direct (G) - 10.9016Motilal Oswal Liquid Fund - Regular (Div-D) RI - 10.0055Motilal Oswal Liquid Fund - Regular (Div-F) RI - 10.0069Motilal Oswal Liquid Fund - Regular (Div-M) - 10.057Motilal Oswal Liquid Fund - Regular (Div-Q) - 10.0305Motilal Oswal Liquid Fund - Regular (Div-W) RI - 10.0157Motilal Oswal Liquid Fund - Regular (G) - 10.8713Motilal Oswal Long Term Equity Fund (D) - 15.0677Motilal Oswal Long Term Equity Fund (G) - 17.0049Motilal Oswal Long Term Equity Fund -Dir (D) - 16.3751Motilal Oswal Long Term Equity Fund -Dir (G) - 18.3844Motilal Oswal Midcap 30 Fund (D) - 17.7881Motilal Oswal Midcap 30 Fund (G) - 24.8998Motilal Oswal Midcap 30 Fund-Dir (D) - 18.2911Motilal Oswal Midcap 30 Fund-Dir (G) - 27.039Motilal Oswal Multi Asset Fund - Direct (G) - 10.1505Motilal Oswal Multi Asset Fund (G) - 10.1149Motilal Oswal Multicap 35 Fund (D) - 22.9823Motilal Oswal Multicap 35 Fund (G) - 26.0864Motilal Oswal Multicap 35 Fund-Dir(D) - 23.0862Motilal Oswal Multicap 35 Fund-Dir(G) - 27.7571Motilal Oswal Nasdaq 100 FOF - Direct (G) - 18.0695Motilal Oswal Nasdaq 100 FOF - Regular (G) - 17.9318Motilal Oswal Nifty 50 Index Fund - Direct (G) - 9.8212Motilal Oswal Nifty 50 Index Fund (G) - 9.7878Motilal Oswal Nifty 500 Fund - Direct (G) - 10.9913Motilal Oswal Nifty 500 Fund (G) - 10.9101Motilal Oswal Nifty Bank Index Fund - Direct (G) - 9.0362Motilal Oswal Nifty Bank Index Fund (G) - 8.9699Motilal Oswal Nifty Midcap 150 Index Fund (G) - 11.5667Motilal Oswal Nifty Midcap 150 Index Fund-Dir (G) - 11.6527Motilal Oswal Nifty Next 50 Index Fund - Dir (G) - 9.6324Motilal Oswal Nifty Next 50 Index Fund (G) - 9.5798Motilal Oswal Nifty Smallcap 250 Index Fund (G) - 11.2182Motilal Oswal Nifty Smallcap 250 Index Fund-Dir(G) - 11.3022Motilal Oswal S&P 500 Index Fund - Direct (G) - 11.3686Motilal Oswal S&P 500 Index Fund (G) - 11.3288Motilal Oswal Ultra Short Term Fund - Dir (Div-D) - 9.7154Motilal Oswal Ultra Short Term Fund - Dir (Div-F) - 9.7337Motilal Oswal Ultra Short Term Fund - Dir (Div-M) - 9.7223Motilal Oswal Ultra Short Term Fund - Dir (Div-Q) - 9.862Motilal Oswal Ultra Short Term Fund - Dir (Div-W) - 9.7262Motilal Oswal Ultra Short Term Fund - Dir (G) - 13.7659Motilal Oswal Ultra Short Term Fund (Div-D) - 9.7189Motilal Oswal Ultra Short Term Fund (Div-F) - 9.7293Motilal Oswal Ultra Short Term Fund (Div-M) - 9.7194Motilal Oswal Ultra Short Term Fund (Div-Q) - 9.8607Motilal Oswal Ultra Short Term Fund (Div-W) - 9.7223Motilal Oswal Ultra Short Term Fund (G) - 13.3861

Buy Right Sit Tight Insights - June 2019

Blog Blog Details
  • June 18, 2019
  • Raamdeo Agrawal|
  • Chairman
Dear investor friends,

When it comes to mutual funds, worldwide, there is a raging debate between active and passive funds. The latter have been steadily gaining market share given their value proposition of low management fees.

In this edition of BRST Insights , I explore the active versus passive debate in the Indian context.

Active v/s Passive Funds – the Indian context

What’s an Active Fund
As the name suggests, an actively managed fund is one in which a manager makes decisions about how to invest the fund s money. Managing an Active Fund involves active buying and selling of stocks with the objective of outperforming a chosen benchmark index. To achieve this, the mutual fund engages the services of portfolio managers and analysts. Such cost of managing an Active Fund is recovered from the mutual fund investors by way of a management fee (currently around 2% in India).

What’s a Passive Fund
In contrast to an Active Fund, a Passive Fund simply follows a market index. It does not have a manager. Thus, a Passive Fund will simply mimic a given benchmark and not make any active buy or sell decisions. For instance, a Nifty 50 Passive Fund will invest in the 50 stocks constituting the Nifty 50 assigning exactly the same weights as in the index. Increasingly, Passive Funds are structured as Exchange Traded Funds (ETFs) i.e. they trade on the exchanges like any other stock.

Active Funds have been in existence since 1770s. In contrast, the first passive index fund was launched only in 1976 by Vanguard Group of the US. Formed by the legendary (Late) John Bogle, Vanguard is today one of the world’s largest mutual funds, specializing in passive investing. Passive Funds are premised on the fact that, net of fees and commissions, Active Funds don’t earn returns significantly higher than the benchmark. So, Passive Funds intend to offer investors a low-cost exposure to the asset class in question, in this case, equities.

Active v/s Passive – the eternal debate
Even as both Active and Passive Funds defend their cause, data suggests that Passive Funds are clearly gaining acceptance vis-à-vis Active. Data compiled by investment research firm MorningStar suggests that in the US, share of equity Passive Funds has consistently risen from 25% in 2009 (approx US$ 0.8 trillion) to almost 48% in 2018 (approx US$ 3.4 trillion), see graph on next page.


Active v/s Passive – the India scenario
In India, Passive Funds have not made any significant inroads so far. In this context, we examined whether there’s a case for Passives to replicate the US success story here too. For this, we observed the performance of Active Funds for various rolling periods of 1 to 5 years over an 11-year period from 2009 to 2019. The findings are tabled below.


The percentage of outperforming Active Funds is healthy across time periods. Equally important to note is the percentage of outperforming funds increases significantly with the time horizon. Thus, over a 1- and 2-year period, about 70% of funds outperform. However, over a 5-year period, as high as 90% of funds outperform.

Going by the above data, there appears to be enough room in India for active investing. One likely reason for this is the fairly high level of non-institutional shareholding. The aggregate promoter holding in India is 50%. Of the balance free float of 50%, nearly a third is still held by individual investors. As institutional investors enjoy both informational and analytical edge over individual investors, the former are likely to outperform at the expense of the latter.


Implications for individual investors
•    Prefer to invest through mutual funds rather than directly.
•    Invest in mutual funds for the long term i.e. preferably at least for five years.
•    Choose fund managers with well-articulated philosophy backed by good long-term performance track record.

I welcome your feedback and suggestions for improvement. Please email the same to insights@motilaloswal.com.

 
Raamdeo Agrawal
Chairman

Note:  The source of all data used in this bulletin is MOAMC internal analysis, unless otherwise mentioned.

Disclaimer
This bulletin has been issued to explain our investment philosophy. The information/stocks mentioned in this document is for general/illustration purposes only and should not be construed as investment advice to any party. The stocks may or may not be part of our portfolio/strategy/schemes. Past performance may or may not be sustained in future. Readers shall be fully responsible/liable for any decision taken on the basis of this bulletin. Past performance may or may not be sustained in the future. This bulletin is not for circulation in general and is meant for intended recipient only. The bulletin does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. The statements contained herein may include statements of future expectations and other forward-looking statements that are based on our current views and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements.




“Reproduced from original article written for cnbctv18.com; published on June 14, 2019”




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