NFO review: Motilal Oswal 5 year G-Sec Fund of Fund

The NFO comes after the launch of the 5 Year G-Sec ETF from the same AMC

Leena GuhaRoy   /   September 28, 2021

Motilal Oswal Asset Management Company (MOAMC) has announced the launch of its Motilal Oswal 5 Year G-sec Fund of Fund. Known for launching an array of passive funds, this low cost open-ended fund of fund scheme will be investing in the units of Motilal Oswal 5 Year G-Sec ETF. Here are the key details about the offering.

NFO timings

The NFO of Motilal Oswal 5 Year G-sec Fund of Fund opened on September 24 and shall close on September 30.

The Motilal Oswal 5 year G-Sec Fund of Fund seeks investment return through investment in units of Motilal Oswal 5 Year G-Sec ETF.

The minimum application amount during NFO is Rs 500.

What’s so special

Motilal Oswal 5 Year G-Sec FoF is an open ended fund of funds scheme investing in units of Motilal Oswal 5 Year G-Sec ETF.

Here are the 5 benefits:

Low Risk: Exposure to Government backed securities

Liquid: Underlying G-Sec is one of the most liquid security

Economical: Invests into low cost passive fund

Balanced Tenure: Falls in a sweet spot between short & long duration

Simple: Easy access to Govt Debt Security

“The underlying G-Sec is one of the most liquid security with a cushioning of ‘No default’ risk.” said Pratik Oswal, Head of Passive Funds, Motilal Oswal Asset Management Company Ltd. “Given the duration of Nifty 5 Yr. Benchmark G-Sec Index, it falls in the sweet spot between short and long duration G-Sec.”

Costs

The indicative total expense ratio of Regular plan Fund of Fund is 0.10% per annum and of Direct plan Fund of Fund is 0.03% per annum.

What else

With no lock-in, indexation benefit, and historical higher pre & post tax returns over Fixed Deposits, the Nifty 5 year Benchmark G-Sec Index can be good alternative to traditional Fixed Deposits.

As per current regulations, the Motilal Oswal 5 Year G-Sec Fund of Fund is treated as a ‘non-equity’ fund and consequently taxed similar to a debt scheme.

If the investment is held for more than 3 years it qualifies for Long Term Capital Gains Tax @ 20%, along with option to avail indexation benefit. Any investment horizon lower than 3 years would attract the Short Term Capital Gain Tax and taxed as per the applicable tax bracket.

Fund Manager of the FoF is Abhiroop Mukherjee, who has 14 years of experience in fund management and product development.

Fund-house speak

“The launch of Motilal Oswal 5 Year G-Sec Fund of Fund is in response to growing demand from investors who do not have Demat or Trading accounts. With low correlation to equities, this Fund of Fund is ideal for investors looking for capital preservation with reduced portfolio volatility.” said Navin Agarwal, MD & CEO, Motilal Oswal AMC.

Exit load

Exit Load of 1% will be applicable if redeemed on or before 15 days from the date of allotment.

There is no exit load if investment redeemed after 15 days from the date of allotment.

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