Different asset classes react differently to business cycles, changes in the economy and geopolitical realities and hence have different levels of risk.
Motilal Oswal AMC is launching Motilal Oswal Multi Asset Fund with an aim to help conservative investors survive the tough conditions of equity markets and lackluster interest rates in fixed income markets. The fund will invest in a diversified basket of four asset classes.
The fund will be open for subscription from July 15, 2020 till July 27, 2020. Motilal Oswal Multi Asset Fund is an open ended fund belonging to multi asset allocation category, the fund’s investment objective is to generate long term capital appreciation by investing in a diversified portfolio comprising of Equity, International Equity Index Funds/ Equity ETFs, Debt and Money Market Instruments and Gold Exchange Traded Funds.
In the current market scenario, a conservative investor is faced with a real dilemma of where to invest. If one opts for the safety of fixed deposits the returns are too low. If one wants a little higher return, the risks are too high. What if there are downgrades? Are low yields compensating for the risks? Equities, on the other hand, have been highly volatile and gold prices have rallied very quickly.
The asset allocation pattern of the Scheme is as follows:
Securities will not be treated as a separate asset class and accordingly, International Equity Index Funds/Equity ETFs have been included in Equity and Equity related instruments. The scheme intends to invest in International Equity Index Funds/Equity ETFs upto 20% of net assets.
- Fund aims to invest in four asset classes, namely, Equity, International Equity, Debt and Gold
- Lower correlations among assets helps to reduce portfolio volatility
- Favourable Risk adjusted returns over any individual asset class
- Investments in Gold and International Equities : to provide a hedge against inflation & diversification
Indian Equities: A high quality portfolio of large cap stocks selected based on proven Q-G-L-P philosophy.
Debt and Money Market Instruments: A high quality AAA portfolio with a 3-5 year average maturity, heavy on G-Sec and SDL’s.
International Equities: Through an allocation to units of Motilal Oswal S&P 500 Index Fund
Gold: Through units of a Gold ETF Fund.
The benchmark for the fund is 30% Nifty 50 TRI + 50 % Crisil Short Term Gilt Index + 10% Domestic Price of Gold + 10% S&P 500 Index (TRI) and investors can invest in the fund through lumpsum or SIP mode with minimum subscription of RS 500/- during NFO and ongoing period.
Having the right asset allocation is the key to navigate such volatile periods. Different asset classes react differently to business cycles, changes in the economy and geopolitical realities and hence have different levels of risk. Allocating funds solely to a single asset class is not prudent as it is prone to behave inconsistently, go through its own cycles and may not garner efficient inflation and risk-adjusted returns. Asset allocation tries to balance the risk by dividing assets among investment vehicles. Low correlation among different asset classes provides the portfolio with an effective hedge lowering the volatility of the portfolio.