If you’ve been an investor in mutual funds, you might have noticed trends where specific fund houses gain significant attention due to outstanding performance across multiple schemes. Motilal Oswal Mutual Fund (MO MF) appears to be in such a phase, with several of its actively managed equity schemes outperforming their peers.
For instance, the Motilal Oswal Midcap Fund has delivered an impressive 64.23% return over the past year, far exceeding the midcap category average of 38.5%. Similarly, other funds like the Flexi Cap Fund, Large and Midcap Fund, and ELSS Fund have also seen stellar performance.
In this article, we will explore the reasons behind this success, the strategies employed by Motilal Oswal Mutual Fund, and the risks associated with these schemes.
Key Highlights
- Outstanding Performance:
- Midcap Fund: Delivered a 64.23% return in the past year, compared to the midcap category average of 38.5%.
- Flexi Cap Fund: One of the best-performing funds with a concentrated portfolio of just 17 stocks.
- Asset Growth: The AUM (Assets Under Management) for the Midcap Fund grew from ₹7,400 crore in December 2023 to ₹23,000 crore in November 2024, marking a 200% growth.
- Investment Strategy – QGLP:
- Q: Quality of business and management.
- G: Growth in earnings.
- L: Longevity of quality and growth.
- P: Price, ensuring investments are made at reasonable valuations.
- Concentrated Portfolio:
- MO MF maintains a highly concentrated portfolio with a significantly lower number of stocks compared to peers. For example, the Flexi Cap Fund holds only 17 stocks versus the category average of 81 stocks.
- This strategy enables high conviction bets but also increases risk.
- Portfolio Overlap:
- The four key funds (Midcap, Flexi Cap, Large and Midcap, ELSS) have several common stocks, such as Zomato, Trent, Kalyan Jewellers, and Coforge.
- This overlap allows simultaneous outperformance but also highlights the risk of limited diversification across funds.
- Unique Stock Bets:
- MO MF takes unique bets, investing in stocks overlooked by other AMCs. For instance, their portfolio includes 14 unique stocks that no other fund house invests in, with significant allocations to these picks.
- High Turnover Ratio:
- Many MO MF funds have a turnover ratio exceeding 100%, indicating frequent buying and selling of stocks. While this approach capitalizes on opportunities, it contrasts with the traditional buy-and-hold strategy.
Table: Key Funds of Motilal Oswal Mutual Fund
| Fund Name | AUM (₹ crore) | Number of Stocks | 1-Year Return (%) | Turnover Ratio (%) | Category Average Return (%) |
| Midcap Fund | 23,000 | 30 | 64.23 | >100 | 38.5 |
| Flexi Cap Fund | 12,600 | 17 | 53.23 | >100 | 40 |
| Large and Midcap Fund | 10,000 | 30 | 52.58 | >100 | 35 |
| ELSS Fund | 8,000 | 25 | 57.6 | 90 | 40 |
What’s Behind the Performance?
- High Conviction Investments: MO MF’s strategy of concentrating portfolios with fewer, high-potential stocks has paid off in the short term. The focus on stocks with high growth and strong fundamentals has enabled these funds to outperform their peers.
- Growth and Momentum Investing: Frequent portfolio churn and timely entry/exit in stocks reflect a growth and momentum-oriented investment style, which aligns with their QGLP strategy.
- Portfolio Overlap: The significant overlap in stock holdings across funds ensures that the success of certain stocks translates to simultaneous outperformance across multiple schemes.
- Unique Bets: Investment in less-followed stocks with high conviction adds an edge but increases risk exposure.
Risks for Investors
- Concentration Risk:
- The concentrated nature of MO MF’s portfolios means higher volatility. A few underperforming stocks can significantly impact fund performance.
- Overlap Risk:
- The significant overlap in stock holdings across funds reduces diversification. Investors holding multiple schemes may be inadvertently overexposed to specific stocks.
- Sustainability of Outperformance:
- Historical trends show that outperforming funds often revert to the mean. The current phase of outperformance may not last indefinitely.
Should You Invest?
Motilal Oswal Mutual Fund’s schemes have shown remarkable performance, but investors should consider the following before investing:
- Assess risk tolerance, given the high-risk, high-reward nature of these funds.
- Avoid overexposure by diversifying across different fund houses.
- Regularly track fund performance to ensure alignment with investment goals.
Conclusion
Motilal Oswal Mutual Fund has leveraged its QGLP strategy, high-conviction stock picks, and growth-oriented approach to deliver exceptional returns. While its funds are worth considering, investors must remain cautious about concentration risks and the sustainability of current performance levels.
Disclaimer:
This content is for educational purposes only and should not be considered financial or investment advice. Mutual fund investments are subject to market risks. Please read all scheme-related documents carefully before investing. Past performance is not indicative of future results. Consult with a financial advisor to ensure the investment aligns with your risk profile and financial goals.