Last Updated on December 29, 2021
This is a review of two Motilal Oswal Asset Allocation Passive Fund of Funds – Aggressive & Conservative currently in the NFO period (9th Feb to 5th Mar 2021). We explain why these offerings are not “passive asset allocation” funds.
What are Motilal Oswal Asset Allocation Passive FoFs?They are two open-ended mutual funds investing in ETFs or index funds of Indian equity (Nifty 500), US equity (S & P 500), Indian Gilts (Nifty 5Y gilt index) and Gold; They are hence known as a fund of fund.
What does conservative and aggressive refer to? There are two funds of funds investing in different passive funds (as mentioned above). They are labelled (somewhat arbitrarily) as aggressive and conservative due to their different indicative asset allocations – see details below.
The so-called “conservative” fund has a risk rating of “high” and the aggressive fund a rating of “very high”. This alone should be enough for investors to reject the “conservative” option (red flag 1).
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!
🔥Enjoy massive discounts on our robo-advisory tool & courses! 🔥
Are these passive asset allocation fund of funds? No, they are not! They are fund of funds (check); They have an asset allocation (check); They invest in passive products (check). However, these FOFs do not passively follow an asset allocation. They can vary their asset allocation actively within an extensive range, making them active funds (red flag, counted below)
How will these two funds of funds be taxed? As “non-equity” funds (colloquially as debt funds).
Why is the aggressive fund of fund being taxed like equity when it invested 95% in equity? Two reasons. To be taxed like an equity fund, a mutual fund should invest 65% of assets in Indian stocks either directly or indirectly via ETFs. (1) This fund of funds can invest in Indian equity via index funds or ETFs (and not just ETFs). (2) Its asset allocation of Indian equity can go below 65%.
There is a big difference between the asset allocation of the benchmark (created for these funds) and the funds’ asset allocation (red flag 2).
Motilal Oswal Asset Allocation Passive FoF: Aggressive Allocation
Aggressive FOF Benchmark: 60% Nifty 500 TRI + 20% S&P 500
TRI (INR) + 5% Domestic Price of Gold + 15% Nifty 5 Yr Benchmark G-Sec Index
The backtested return performance is for this asset allocation. If the fund sticks to this asset allocation, it would have been a passively managed asset allocation fund. Sadly this is not the case.
The fund has immense freedom to vary its asset allocation (red flag 3)
- 40% to 90% in Motilal Oswal Nifty 500 Index Fund / Motilal Oswal M50 ETF
- 10% to 30% in Motilal Oswal S&P 500 Index Fund / Motilal Oswal NASDAQ 100 ETF
- 0% to 40% in Motilal Oswal 5 Year G – Sec ETF
- 0% to 20% in ICICI Prudential Gold ETF
- 0% to 5% in Money Market (cash)
How will the asset allocation vary? Unknown (red flag 4)
Motilal Oswal Asset Allocation Passive FoF: Conservative Allocation
Benchmark: 25% Nifty 500 TRI + 10% S&P 500 TRI (INR) + 5% Domestic Price of
Gold + 60% Nifty 5 Yr Benchmark G-Sec Index.
The asset allocation can vary significantly in an unknown manner. (red flag 4)
- 0% to 40% in Motilal Oswal Nifty 500 Index Fund / Motilal Oswal M50 ETF
- 0% to 20% in Motilal Oswal S&P 500 Index Fund / Motilal Oswal NASDAQ 100 ETF
- 40% to 90% in Motilal Oswal 5 Year G – Sec ETF
- 0% to 20% in ICICI Prudential Gold ETF
- 0% to 5% in Money Market (cash)
The benchmark allocation performance is of no relevance to ascertain whether to invest in the fund of funds or not due to the unknown investment strategy and significant departure in indicative asset allocation. Therefore their performance is not included in this review (but shall be discussed independently). There are enough red flags to avoid these kichdi offerings: like a food Youtuber making a video out of leftovers, the AMCs has created a product with fancy wordings to drive some AUM into their existing funds. This is just another dynamic asset allocation funds clothed as a fund of fund.
This is not a passive fund of fund. This is an actively managed fund of fund investing in passive funds. This is a huge difference and is enough to reject these two offerings. As mentioned above, investors can quickly leave such offerings within a few minutes by looking for red flags.
🔥Enjoy massive discounts on our courses and robo-advisory tool! 🔥
Use our Robo-advisory Excel Tool for a start-to-finish financial plan! ⇐ More than 1000 investors and advisors use this!
New Tool! => Track your mutual funds and stocks investments with this Google Sheet!
- Follow us on Google News.
- Do you have a comment about the above article? Reach out to us on Twitter: @freefincal or @pattufreefincal
- Join our YouTube Community and explore more than 1000 videos!
- Have a question? Subscribe to our newsletter with this form.
- Hit 'reply' to any email from us! We do not offer personalized investment advice. We can write a detailed article without mentioning your name if you have a generic question.
Get free money management solutions delivered to your mailbox! Subscribe to get posts via email!
Explore the site! Search among our 2000+ articles for information and insight!
About The Author
Dr M. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. He has over nine years of experience publishing news analysis, research and financial product development. Connect with him via Twitter or Linkedin, or YouTube. Pattabiraman has co-authored three print books: (1) You can be rich too with goal-based investing (CNBC TV18) for DIY investors. (2) Gamechanger for young earners. (3) Chinchu Gets a Superpower! for kids. He has also written seven other free e-books on various money management topics. He is a patron and co-founder of “Fee-only India,” an organisation promoting unbiased, commission-free investment advice.Our flagship course! Learn to manage your portfolio like a pro to achieve your goals regardless of market conditions! ⇐ More than 3000 investors and advisors are part of our exclusive community! Get clarity on how to plan for your goals and achieve the necessary corpus no matter what the market condition is!! Watch the first lecture for free! One-time payment! No recurring fees! Life-long access to videos! Reduce fear, uncertainty and doubt while investing! Learn how to plan for your goals before and after retirement with confidence.
Our new course! Increase your income by getting people to pay for your skills! ⇐ More than 700 salaried employees, entrepreneurs and financial advisors are part of our exclusive community! Learn how to get people to pay for your skills! Whether you are a professional or small business owner who wants more clients via online visibility or a salaried person wanting a side income or passive income, we will show you how to achieve this by showcasing your skills and building a community that trusts you and pays you! (watch 1st lecture for free). One-time payment! No recurring fees! Life-long access to videos!
Our new book for kids: “Chinchu gets a superpower!” is now available!
Must-read book even for adults! This is something that every parent should teach their kids right from their young age. The importance of money management and decision making based on their wants and needs. Very nicely written in simple terms. - Arun.Buy the book: Chinchu gets a superpower for your child!
How to profit from content writing: Our new ebook for those interested in getting side income via content writing. It is available at a 50% discount for Rs. 500 only!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (it will work with any index!), or you buy the new Tactical Buy/Sell timing tool!
We publish monthly mutual fund screeners and momentum, low volatility stock screeners.
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on mutual funds, stocks, investing, retirement and personal finance developments. We do so without conflict of interest and bias. Follow us on Google News. Freefincal serves more than three million readers a year (5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any paid articles, promotions, PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
- Twitter @freefincal
- Subscribe to our Youtube Videos
- Posts feed via Feedburner.
Our publications
You Can Be Rich Too with Goal-Based Investing
Published by CNBC TV18, this book is meant to help you ask the right questions and seek the correct answers, and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now.Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want
This book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at a low cost! Get it or gift it to a young earner.Your Ultimate Guide to Travel
This is an in-depth dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, and how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 300 (instant download)