Know Your Fund (KYF) - MOSt Focused Multi-cap 35


Posted By : Kushal Kothari
Tags :  Equity KYF

Starting today, we are introducing another series for our readers called KYF, or Know your Fund. While AMCs, like many online portals, already detail various aspects of a scheme, we intend to present a summary in our own way. We will try not to make it too statistical so as to throw the user in a sea of numbers, while also highlighting the key aspects that would help the investor get a better understanding of how the particular scheme is being managed. 

 

About the Scheme

MOSt Focused 35, henceforth to be referred as MOSt 35, is the flagship Equity scheme from the house of Motilal Oswal securities. It is an equity diversified scheme, which aims to invest primarily in domestic equities, regardless of the market capitalization or the sectors of investment.

As with other market-cap agnostic Multicap funds, MOSt 35 benefits from having a wider universe of securities to target for investment. Currently, the scheme is roughly 25% invested in mid-cap securities while the bulk of 75% is invested in large-cap schemes.

The Fund has been relatively late to launch in the market compared to its peers. However, since inception in 2014, the scheme has delivered some outstanding performance as compared to its peers in the last 3 years. The recent absolute performance, however, has been rather average. Yet, taking into account the volatility and other qualitative parameters, the scheme fares pretty well on the scorecard of most rating agencies.

 

Key parameters:

Type

Equity Multi-cap

Assets under management

11,411 crore

Expense ratio

1.33%

AMFI risk rating

Moderately high

Exit Load

Nil after 1 year

Asset strategy

To invest a minimum of 65% in Equities, with its investments spread across a maximum of 35 securities

 

About the Fund Manager(s)

The lead manager, Gautam Sinha Roy seems to have about 12 years of relevant experience in the equity research/fund management space. He, along with his co-manager Siddharth Bothra manage all the domestic equity investments in Motilal Oswal AMC.

Gautam Sinha Roy - Managing the fund since 5th May 2014

Education

MBA, IIM Calcutta

Age

39 Years

Fund Management Experience

Edelweiss Capital Research – 2005-2007

Mirae India – 2007-2008

IIFL Capital Singapore – 2008-2012

Motilal Oswal Securities – 2012-2013

Motilal Oswal AMC – 2013-Present

Other Funds Managed

MOSt Focused Long-term fund

MOSt Focused Dynamic Equity Fund

Co-manager: MOSt 25 and MOSt Midcap 30

 

Siddharth Bothra – Co-managing the fund since 23rd Nov 2016

Education

MBA, ISB, Hyderabad

Age

40 Years

Fund Management Experience

VCK Stock Broking – 2001 - 2003

Alchemy Equity Research - 2004-2005

Motilal Oswal Securities – 2005 – 2013

Motilal Oswal AMC – 2013 - Present

Other Funds Managed

MOSt Focused 25, MOSt Midcap 30

Co-manages MOSt Focused Long-term MOSt Dynamic equity fund.

 

The fund also has a foreign equities fund manager along with a debt fund manager. While these managers play a significant role in other schemes from Motilal Oswal, considering the nature of MOSt 35 and its investment behaviour, the impact of the other two fund managers on scheme performance seems limited.

 

Performance

Evaluating the performance of a scheme is like calculating those never-ending cricket statistics on Cricinfo. One could slice and dice the numbers using various mathematical calculations, and this could go on and on. Instead of going into the various absolute and relative performance and risk measures, we like to understand a scheme with the aid of two specific charts.

 

1-year Rolling returns

As we look at the one-year rolling return of the scheme over the last 3 years, a couple of things stand out immediately - 

The scheme has more or less outperformed the Expowealth Multi-cap category Index throughout the period. The Multi-cap category index is our proprietary Index, weighted for all the schemes in the Multi-cap category. The stated benchmark for the scheme as such is Nifty 500. However, these benchmarks are rarely Total Return indices (accounting for dividends). Also, as an investor, the choice is between a fund and its peers, not with a passive benchmark.

MOSt 35 1 year rolling returns

MOSt 35 has delivered an average of 20%+ one-year returns over the period. This should be taken with a pinch of salt. With the exception of the 2015 correction, the last four years have been a bull market for the Indian markets. Nonetheless, the outperformance with respect to its peers gives a sense of confidence in the way the scheme is being managed.

 

Fingerprinting

The next chart that we’d like to draw your attention to is the Fingerprint of the fund. We plot the monthly returns of the scheme and the category returns on a chart to visualize the performance of MOSt 35 vis-a-vis its peers. More data points above the diagonal line indicate a good performance by the scheme.

Fingerpritn MOSt 35

  Category MOST 35 outperformance MOST 35 underperformance Percent times outperformance
Total Up Months 29 17 12 59%
Down Months 16 9 7 56%

 

 

 

Few observations:

  1. The scheme has managed to outperform the category monthly returns in up-market as well as down-market months.
  2. In case of high negative months, the scheme has almost always underperformed.
  3. In case of low negative months and in positive months, the scheme seems to outperform its peers quite well.

 

Fund Manager's views

We got in touch with the fund management team at Motilal to get a sense of how the managers see MOSt 35’s performance to unfold in the next few months. As per the fund manager - 

1. The market is clearly factoring in a sharp improvement in earnings, and whether that happens in CY18 is the big question. Still given the depressed base of earnings it makes sense to be hopeful about an earnings recovery. Sectors which can drive that include:

a. Consumption, especially Rural

b. Affordable housing

c. PSU and Corporate banks and

d. Continued recovery in beaten down sectors including Steel and Telecom

 

2. From a portfolio perspective the very high valuations of stocks, especially mid and small caps might give away somewhat in the coming year. The important thing will be to remain invested in stocks which deliver strong enough earnings growth to ride out the eventual PE contraction.

 

3. While these are interesting times indeed with a lot of flux, some local and some global. But, the important point is that truly moated companies stand out especially in such times of flux. Even mediocre companies can ride a big wave and look extraordinary when the external conditions are highly favourable but get truly exposed when the tide goes out! The history of markets is a tale of the “can’s” and the “can not’s”. The companies/management which “can” ride out a turn in the environment are the ones which are moated, paranoid and adaptive. In a fast-changing world, the importance of these qualities cannot be overemphasized. I believe that we own a set of adaptive and capable management in your portfolio. We will continue to monitor them for their performance in a changing environment and focus on selecting true long-term winners.

 

Expowealth take

MOSt 35 clearly is a good performer and has made it to our Expowealth shortlist for Multi-cap funds since last July. The absolute performance in recent few months may warrant a relook down the line. However, given the track record of the fund and its managers, MOSt 35 is likely to remain as our top recco for the multi-cap category in the short to medium term. 

 

Hope the above information helps with a better understanding of the scheme. 

 

Happy Investing!

 

Disclaimer: Motilal Oswal is an AMC partner of Expowealth. However, we only aid investment in direct schemes and do not earn any commission of AUM invested in any Motilal Schemes. The above information is only to aid the investor in making an informed investment decision for their portfolio.