They are in for a disappointment this year. Markets are uncertain and thus it is very important that you hold a significant portion of your portfolio in large caps to offer stability, while mid and small cap element can be used to give a boost to portfolio returns over the long term. Diversification is the key for consistent wealth creation from equity markets.

Multi Cap Funds stands out due to their flexibility to invest anywhere and offer the benefit of diversification across market caps. However, the new classification offers multi-cap funds the flexibility to switch allocation across market caps, without any limit or restriction. Hence most of the funds in the multi-cap category are currently biased towards large caps, while very few offer proper diversification across market caps.

Motilal Oswal Multicap 35 Fund is one such large cap biased multi-cap fund from Motilal Oswal Mutual Fund. With a performance track record of a little over 4 years, Motilal Oswal Multicap 35 Fund is among the very few schemes that have been able to make a mark among investors. It is very rare for a funds corpus to cross the 10,000 crore mark within first 4 years. Motilal Oswal Multicap 35 Fund has been able to achieve the feat. Following a focused investment approach, the fund is adapted to benefiting from high conviction stocks, preferably in the large cap segment. However with its recent classification under multi-cap funds, Motilal Oswal Multicap 35 Fund can look for diversification across market caps.

Fund Facts – Motilal Oswal Multicap 35 Fund

Category	Multi Cap Fund	Style	Growth
Type	Open ended scheme	Market Cap Bias	Multi Cap Fund
Launch Date	28-Apr-14	SI Return (CAGR)	24.13%
Corpus (Cr)	Rs 14,052	Min./Add. Inv.	Rs 500 / Rs 500
Expense Ratio (Dir/Reg)	1.16% / 2.04%	Exit Load	1%

Portfolio Data as on August 31, 2018.
SI Return as on September 19, 2018.
(Source: ACE MF)

Growth Of Rs 10,000, Invested In Motilal Oswal Multicap 35 Fund Since Inception

Motilal Oswal Multicap 35 Fund: Year-on-Year Performance

Motilal Oswal Multicap 35 Fund: Performance Vis-à-vis Category Peers

Scheme Name	Corpus (Rs Cr)	1 Year (%)	2 Year (%)	3 Year (%)	5 Year (%)	Std Dev	Sharpe
Motilal Oswal Multicap 35 Fund	14,052	21.33	24.16	18.90	--	13.50	0.19
Principal Multi Cap Growth Fund	726	24.70	25.07	16.33	22.64	15.74	0.20
Aditya Birla SL Equity Fund	10,307	17.13	22.63	15.87	23.70	13.10	0.21
SBI Magnum Multicap Fund	6,176	19.95	20.23	15.80	22.66	12.45	0.20
Invesco India Multicap Fund	604	22.71	21.48	15.27	26.77	14.79	0.16
Kotak Standard Multicap Fund	21,927	18.41	21.17	15.14	22.56	12.07	0.22
Mirae Asset India Equity Fund	9,049	20.97	21.77	15.01	22.48	12.74	0.23
Parag Parikh Long Term Equity Fund	1,352	21.48	18.38	14.17	20.64	9.40	0.27
BNP Paribas Multi Cap Fund	901	20.27	19.82	13.85	20.59	13.58	0.13
Edelweiss Multi-Cap Fund	131	25.38	21.93	13.70	--	14.07	0.18
ICICI Pru Multicap Fund	3,047	15.37	18.06	13.08	20.28	12.19	0.19
DSP Equity Fund	2,786	18.71	19.85	12.38	19.27	14.34	0.15
Franklin India Equity Fund	12,330	15.89	16.03	12.12	20.53	11.22	0.16
HSBC Multi Cap Equity Fund	655	18.39	19.25	12.19	20.82	14.21	0.16
IDFC Multi Cap Fund	5,844	17.95	15.79	11.25	21.31	12.89	0.10
L&T Equity Fund	2,836	18.31	18.04	11.24	18.85	12.63	0.14
HDFC Equity Fund	22,798	17.59	20.16	11.08	18.81	16.13	0.15
IDBI Diversified Equity Fund	372	18.15	14.88	10.77	--	11.75	0.08
UTI Equity Fund	8,874	19.66	15.99	10.50	18.03	11.89	0.18
Canara Rob Equity Diver Fund	939	20.61	18.26	10.27	16.26	13.37	0.14
Baroda Pioneer Multi Cap Fund	750	15.91	16.58	9.92	16.62	12.93	0.09
Reliance Multi Cap Fund	10,269	19.59	15.69	8.81	18.63	14.76	0.07
Taurus Starshare (Multi Cap) Fund	227	14.00	15.09	8.36	14.95	13.52	0.08
Union Equity Fund	226	14.41	14.18	6.59	13.31	12.01	0.09
LIC MF Multi Cap Fund	285	11.35	11.51	4.81	12.31	15.03	0.03
NIFTY 500 - TRI		20.08	19.35	12.01	16.95	13.11	0.10

Returns are on a rolling basis and those depicted over 1-Yr are compounded annualised.
Data as on September 19, 2018
(Source: ACE MF)

*Please note, this table only represents the best performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme related documents carefully. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

In terms of performance, Motilal Oswal Multicap 35 Fund tops the list of multicap funds on 3 year rolling return basis. The fund has done exceedingly well across periods during short tenure of its existence and has outperformed the benchmark by a CAGR of around 5-7 percentage points over 2-year and 3-year rolling periods, while over 1-year rolling periods the fund has marginally outperformed the index.

In terms of the risk-reward, Motilal Oswal Multicap 35 Fund seems reasonable. With a concentrated strategy, the risk in the fund has been marginally higher than the benchmark, but still the risk-adjusted return generated by the fund has been quite healthy. It has generated superior risk-adjusted returns, compared to its benchmark and most of the category peers.

Investment Strategy of Motilal Oswal Multicap 35 Fund

Motilal Oswal Multicap 35 Fund follows focused investment strategy, and aims for long term capital appreciation by investing in a maximum of 35 equity and equity related instruments across sectors and market capitalization. The investment philosophy and investing style followed at Motial Oswal AMC is centered on 'Buy Right: Sit Tight‘ principle.

While picking stocks for the portfolio, the fund management looks at ‘Quality’ of both business and management, ‘Growth’ in earnings and sustained ROE, ‘Longevity’ of the competitive advantage or economic moat of the business. It also aims to buy a good business at a fair ‘Price’ and strictly follows Buy and Hold strategy in order to benefit from growth cycle.

Motilal Oswal Multicap 35 Fund - Portfolio Allocation and Market Capitalisation Trends

Despite being classified under multi-cap funds, Motilal Oswal Multicap 35 Fund holds a large cap bias. It has seen months with almost negligible exposure to mid-caps. In the last 12 months, the allocation to large-caps has been in the range of 80% to 90% of its assets, while mid and small caps have been in the range of 8% to 16%. The cash level in the portfolio barely crosses 2%. As on August 31, 2018, Motilal Oswal Multicap 35 Fund maintained an exposure of around 89% in large-caps and 9% in mid and small-caps; while its exposure to cash and others accounted for just 1.8% of its assets.

Motilal Oswal Multicap 35 Fund – Top Portfolio Holdings

Top 10 Stocks Stocks % of Assets HDFC Ltd. 9.03 HDFC Bank Ltd. 8.32 Maruti Suzuki India Ltd. 6.62 Infosys Ltd. 6.45 IndusInd Bank Ltd. 5.74 Tata Consultancy Services Ltd. 4.98 Eicher Motors Ltd. 4.81 Bajaj Finance Ltd. 4.71 United Spirits Ltd. 3.74 Bharat Petroleum Corporation Ltd. 3.56	Top 5 Sectors
Holdings (in %) as on August 31, 2018 (Source: ACEMF)

Motilal Oswal Multicap 35 Fund is selective while picking stocks and usually holds a compact portfolio of 25 to 35 stocks. As on August 31, 2018, the fund held just 27 stocks in its portfolio, with major concentration being towards its top 5 stock holdings that range between 5%-10% of its assets. HDFC Ltd., HDFC Bank, Maruti Suzuki, Infosys and IndusInd Bank are the top 5 holdings in the portfolio, together commanding about 36% of its assets. The top 10 holdings held a combined exposure of about 58%.

The sector allocation in the fund’s portfolio is distinct compared to most other schemes in the multicap funds category. Banking and Finance stocks hold a combined weightage of about 45% in the portfolio, followed by Auto and Infotech that together account for 25% allocation in the portfolio. Defensives like Consumption and Pharma too occupy a significant exposure in the portfolio. In the last one year the fund has gradually added exposure to Infotech, while it has significantly reduced exposure to Pharma and Petroleum Products.

Major Gainers: In the last one year, Motilal Oswal Multicap 35 Funds has held just 29 distinct stocks in its portfolio. Stocks like Bajaj Finance and Britannia Industries have been the major gainers in the portfolio. Other stocks like AU Small Finance Bank, United Spirits, Eris Lifesciences, Maruti Suzuki, Alkem Laboratories, HDFC Bank, RBL Bank and IndusInd Bank too have contributed handsomely to the funds’ performance.

Major Losers: With a loss of over 65% in the last one year, Manpasand Beverages has been the major loser in the fund’s portfolio. The fund held about 1.77% exposure to the stock before it started tumbling in May 2018. Currently, the exposure to this stock is down to about 0.5% of its assets. HPCL, BPCL, Max Financial Services, Interglobe Aviation present in the fund’s portfolio are down in the range of 25-50% in the last one year. The fund has held about 2% to 3.5% exposure in these stocks.

Suitability of Motilal Oswal Multicap 35 Fund

Motilal Oswal Multicap 35 Fund is not a pure multi cap fund. It holds a large cap bias and has been prudent in its fund management. The fund has not taken undue risk of midcaps and keeps a reasonably diversified portfolio across stocks and sectors. The current fund manager Mr Gautam Sinha Roy has been with the fund almost since inception and has done well to identify high growth stocks with the potential to capture alpha over the benchmark. Essentially, Motilal Oswal Multicap 35 Fund has built an extra-ordinary track record in a short span of time. The superior performance has helped gain investor’s attention, thus making it one of the largest schemes in the multicap funds category.

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Note: This write up is for information purpose and not a recommendation to buy or sell the mutual fund scheme. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your financial planner or investment advisor.

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DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014  

About the Company including business activity 

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989. 

QIS was promoted by Mr. Ajit Dayal with an objective of providing value-based information / views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services. 

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Disciplinary history

There are no outstanding litigations against the Company, it subsidiaries and its Directors. 

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10. Primary Real Estate Advisors Private Limited;
11. Rahul Goel;
12. I V Subramaniam.

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3. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront /annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices

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Subject Company means Mutual Fund Schemes

Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021 Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021. Email: info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222

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