Are you bored of investing in regular mutual funds and tech funds and looking beyond India and US? How about investing in large non tech companies like Nestle, Airbus, Honda, GSK, Hitachi, Sony, Toyota etc.? Motilal Oswal has launched MSCI EAFE Top 100 Select Index Fund, which invests in an index fund that invests in companies which are global brands beyond tech. The underlying index has generated 12.8% annualized returns in the last 5 years. Should you invest in Motilal Oswal MSCI EAFE Top 100 Select Index Fund NFO? What are the risk factors of investing in such international mutual funds?
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Motilal Oswal MSCI EAFE Top 100 Select Index Fund – NFO Details
This is an open-ended mutual fund scheme. This NFO is now open for subscription and closes for initial subscription on Thursday, 25th November, 2021. Here are the NFO details.
|Scheme reopens for continuous purchase/sale||Within 5 business days|
|Minimum Lumpsum||Rs 500|
|Minimum SIP||Rs 500 for 12 months|
|NAV of the fund||Rs 10 during NFO period|
|Exit Load||1% if redeemed within 15 days|
|Risk||Very High Risk|
|Benchmark||MSCI EAFE Top 100 Select Index)|
|Fund Manager||Mr. Ankush Sood (Foreign Securities)
Mr. Abhiroop Mukherjee (Debt component)
|Max TER||1% for regular and 0.5% for direct|
Motilal Oswal MSCI EAFE Top 100 Select Index FundNFO SID
What is the investment objective of Motilal Oswal MSCI EAFE Top 100 Select Index Fund?
The investment objective is to generate long term capital appreciation by investing in securities of MSCI EAFE Top 100 Select Index subject to tracking error.
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 is as follows:
|Type of instruments||Min %||Max %||Risk Profile|
|Equity and Equity Related Securities of MSCI EAFE Top 100 Select Index||95%||100%||High|
|Units of Liquid schemes / Money Market Instruments / iShares Core MSCI EAFE ETF (IEFA), iShares MSCI EAFE ETF (EFA), iShares Core MSCI International Developed Markets ETF (IDEV), Vanguard FTSE Developed Markets ETF (VEA)||0%||5%||Low|
Can NRI invest in this MF scheme?
NRIs can invest in this scheme. They can invest on repatriation or non repatriation basis.
What does MSCI EAFE Top 100 Select Index contain?
Since this fund invests in MSCI EAFE Top 100 Select Index, it is important for us to understand the underlying index details. EAFE refers to Europe, Australasia and Far East.
The MSCI EAFE Top 100 Select Index is designed to measure the performance of the top 100 companies, selected from 10 large developed markets, out of the MSCI EAFE Index.
It has exposure to 10 largest developed markets.
It contains stocks which are diversified across sectors and geographies.
Since this fund invests in companies which are outside India, it has a low correlation to Indian equities.
This index would have exposure to multiple currencies.
Top 10 Stocks from this index
Performance of MSCI EAFE Top 100 Select Index
This fund invests in MSCI EAFE Top 100 Select Index. Let us check how this index performed in the last 10 years, both in terms of annualized returns and SIP returns.
Why to invest in the Motilal Oswal MSCI EAFE Top 100 Select Index Fund?
Here are a few reasons to invest in this fund.
1) This fund invests in top non tech companies which are outside India and US. These large companies include Nestle, Asml holding, Roche Holding, Astra Zeneca, Toyota Motor, Novartis etc., Investors can get an opportunity to invest in such companies by investing in this fund.
2) While one can invest in Indian mutual funds and US based mutual funds, investing in non tech index funds can provide portfolio diversification.
3) This fund invests in index fund which has low correlation with Indian equity markets. Means if SENSEX is under performing, this international fund would have low impact.
4) Currently the index is largest non US theme by AUM.
5) The underlying index has performed well and generated 11.5% annualized returns in last 10 years and 12.8% annualized returns in the last 5 years.
Major risk factors you should consider before investing in such funds
One should consider some of these risk factors / negative factors before investing.
1) This underlying fund would invest in companies listed listed outside India and not related to technology. If you observe, technology companies has been outperforming in the medium to long term compared to non technology companies. You might get disappointed comparing it with the performance of tech companies.
2) Since it invests outside India, this is classified as an international mutual fund and there are geopolitical risks and currency risks.
3) This fund invests in an index. There could be tracking error. If such tracking error is high, there could be high gap between index performance and fund performance.
4) Investors should read all risk factors from the scheme information document before investing in such funds.
Also Read: Should you invest in Nippon India Taiwan Equity Fund?
Should you invest in Motilal Oswal MSCI EAFE Top 100 Select Index Fund?
Motilal Oswal MSCI EAFE Top 100 Select Index Fund is an international fund that invests in non tech companies outside India and US. The underlying index has generated 11.5% annualized returns in last 10 years and 12.8% annualized returns in last 5 years. While investing in tech companies can provide high growth in investments, non tech companies can provide stable growth. High risk investors can invest in this fund. Moderate to low risk investors should stay away from such funds.
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I think high risk investors look for higher returns. But there is no such high returns from this index. So then why would anyone invest in this fund?
Pradeep, This fund invests in non tech non India/US stocks. Such funds can be as used for diversification. Since it is global fund and invests majorly in global non tech companies, it is termed as high risk.
I understand diversification, but past history of returns does not show any high degree of outperformance against US or Indian markets.
If US markets gave 20% and Indian markets gave 15% but this index gave only 12% during a certain period in the past, what’s the point of investing in this index?
I can just invest in US and Indian markets which gives me higher returns.