Motilal Oswal Equity Hybrid Fund (MOFEH) – Should you invest?
Motilal Oswal launched its New Fund in the balanced fund category last week. Motilal Oswal Equity Hybrid Fund NFO has some unique features. This hybrid fund has come with Cash flow option where you can get regular cash flows which is somewhat like Dividend option. What is Motilal Oswal Equity Hybid Fund investment strategy? How does Motilal Oswal Cash Flow Plan work exactly? What are various options available to invest and withdraw from this fund? How is the Performance of Existing Hybrid or Balanced Mutual Fund Schemes?Should you invest in Motilal Oswal Equity Hybrid Fund NFO?
Features of Motilal Oswal Equity Hybrid Fund NFO
1) This is an open-ended equity scheme investing predominantly in equity and equity related instruments.
2) This scheme has opened for subscription on 24th August, 2018.
3) This scheme would close for subscription on 7th September, 2018.
4) Since this is an open ended scheme, it would again open for subscription after 5-7 working days of closure.
5) This scheme is available in both regular and direct plans.
6) This plan offers only growth option.
7) This scheme is available for lump sum and SIP investment.
8) Minimum investment is Rs 5,000 and in multiples of Rs 1 there-off for lump sum investments.
9) Minimum investment is Rs 1,000 per month for monthly SIP and for a tenure of 6 months. Minimum investment is Rs 2,000 per quarter for quarterly SIP and tenure is for 6 months.
10) The NAV of the NFO is Rs 10 per unit now during initial subscription.
11) There is no entry load to invest in this mutual fund scheme.
12) If one wants to exit within 1 year from investment, there is exit load of 1% of the invested value.
13) This scheme is classified as moderately high risk scheme.
14) This scheme benchmark is Crisil Hybrid Index.
15) Scheme total expense ratio (TER) is estimated up to 2.5% of the total assets on any day.
Who is the Fund Manager for Motilal Oswal Equity Hybrid Fund (MOFEH)?
The Fund Managers are Mr. Siddharth Bothra, Mr. Akash Singhania and Mr. Abhiroop Mukherjee.
What is the investment objective and strategy of this Motilal Oswal Equity Hybrid Fund?
The investment objective is to generate equity linked returns by investing in a combined portfolio of equity and equity related instruments, debt, money market instruments and units issued by Real Estate Investment Trust (REITs) and Infrastructure Investment Trust (InvITs). However, there can be no assurance or guarantee that the investment objective of the Scheme would be achieved.
What is the allocation pattern in this mutual fund scheme?
This fund investment pattern looks as follows:
1) It invests 65% to 80% in multicap portfolio with a large cap bias which is high risk.
2) It invests 20% to 35% in Debt, Money Market Instruments, G-Secs, Bonds, Debentures, Cash and Cash at call, etc. which are low to medium risk.
3) It invests 0% to 10% in Units issued by REITs and InvITs which are medium to high risk.
What are various options available to invest and withdraw from this fund?
Like any other fund, one can do SIP, STP, SWP in this plan once invested. However, Motilal Oswal is now offering Motilal Oswal Cash Flow Plan (MO – CP).
How does Motilal Oswal Cash Flow Plan work exactly?
MO – CP enables investor to withdraw a regular sum from his investments in the eligible Schemes of MOMF at a fixed percentage of original investments at a predefined frequency irrespective of the movement in market value of the investments and would be subject to the availability of account balance of the investor.
Here are the features of Cash Flow Plan of Motilal Oswal Mutual Funds:
1) MO – CP offers an investor the advantage of withdrawing a fixed percentage of his or her investment at the specified date for a designated tenure period at a predefined frequency i.e. monthly, quarterly and annually.
2) This feature is for lump sum investments only. The payout will be calculated on the basis of each lump sum investment.
3) It presently offers three options:
a. MO – CP @ 7.5% p.a. of original cost of investment. The payouts for monthly and quarterly frequency would be at the rate of 0.625% and 1.875% respectively.
b. MO – CP @ 10% p.a. of original cost of investment. The payouts for monthly and quarterly frequency would be at the rate of 0.833% and 2.5% respectively.
c. MO – CP @ 12% p.a. of original cost of investment. The payouts for monthly and quarterly frequency would be at the rate of 1.0% and 3.0% respectively.
4) In case of partial redemptions, the payouts will further happen on the original investment cost and not the balance investment.
5) In case of the account balance available under the folio is less than the desired payout amount, the redemption will be NFO SID of Motilal Oswal Equity Hybrid Fund (MOFEH) processed for the available amount in the folio and the folio would be closed.
6) Investors can discontinue with this facility at any time by providing a valid form which shall be made effective within 7 calendar days of the date of receipt of the said request.
Can NRI invest in this Motilal Oswal Equity Hybrid Fund?
Yes, they can invest in this scheme. They can invest in this mutual fund scheme on repatriation basis subject to approvals from RBI. However, citizens of USA/Canada cannot invest in this scheme.
How is the Performance of Existing Hybrid or Balanced Mutual Fund Schemes?
Currently there was already a bunch of balanced funds in the market, let us look at their performance.
1) HDFC Hybrid Equity Fund: This fund gave 23% annualized returns in the last 5 years and 7% returns in the last 1 year.
2) ICICI Pru Child Care Fund: This fund gave 20% annualized returns in the last 5 years and 13% returns in the last 1 year.
3) SBI Hybrid Equity Fund: This fund gave 20% annualized returns in the last 5 years and 12% returns in the last 1 year.
What are the risks involved in this fund?
One should consider some of these risk factors before investing.
1) This mutual fund scheme invests in multicap portfolio up to 80%, which could still be high risk.
2) Mutual fund scheme invests in derivatives, REITS and InvITs which are high risk.
3) This fund invests up to 35% in debt instruments. Certain debt instruments carry credit risk and there could be a downfall in such instrument ratings and values.
Should you invest in Motilal Oswal Equity Hybrid Fund (MOFEH)?
Hybrid mutual funds are not new. However, an hybrid fund with Cash Flow Plan might be attracting investors. However, an investor already tasted this through dividend option or SWP already. However dividends or SWP are based on units and amount. Under Cash flow Plan we can fix the %age of investment to withdraw every year/quarter/month (e.g. 10% of the investment). Apart from this there is nothing special about this plan. There are best balanced / hybrid mutual funds already in the market .If you are a high risk investor and want to test the new NFO in this segment, you can go ahead. Alternatively, you can invest in some of the top Performing Balanced Mutual Funds in the market now.
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