NFO: S&P BSE Low Volatility ETF and Index Fund

By Morningstar |  03-03-22 | 
 

Motilal Oswal Asset Management Company has announced the launch of its Low Volatility factor-based ETF and Index Fund – Motilal Oswal S&P BSE Low Volatility ETF (Exchange Traded Fund) and Motilal Oswal S&P BSE Low Volatility Index Fund.

These are open-ended schemes replicating/tracking the S&P BSE Low Volatility Total Return Index. The low volatility strategy involves buying stocks that have higher stability in price movements based on past returns.

The S&P BSE Low Volatility Index selects the 30 least volatile companies as defined in the index methodology. The constituents need to be part of the S&P BSE LargeMidCap Index with a minimum listing history of one year.

The maximum weight of stock is capped at 5% and the index gets rebalanced semi-annually in March and September. The S&P BSE Low Volatility Total Return Index (TRI) has significantly outperformed the S&P BSE LargeMidCap TRI over the last 15 years; in fact, the index has outperformed the S&P BSE LargeMidCap TRI in 9 out of the last 16 calendar years.

"As compared to Nifty 50, the S&P BSE Low Volatility TRI tends to fall less during market crashes, which more than compensates for relative underperformance during the recovery phase after these events. Basis average 3 year rolling returns, S&P BSE Low Volatility TR Index (+16.5%) has outperformed S&P BSE LargeMidCap TR Index (+11.3%) by 5.2%. (All performance numbers as of 28- Feb-2022, sourced from Asia Index Private Limited.)," states the release.

The NFOs of Motilal Oswal S&P BSE Low Volatility ETF (Exchange Traded Fund) and Motilal Oswal S&P BSE Low Volatility Index Fund will open for subscription on March 04, 2022, and closes on March 16, 2022.

In terms of index composition as of Feb 28, 2022, the top 10 stocks constitute nearly 39.3% of the S&P BSE Low Volatility Index weight, indicating good stock-level diversification.

S&P BSE Low Volatility Index has historically been overweight on the Consumer sector

From the macro-economic sector coverage, Consumer constitutes 45.9% of the overall composition, followed by Healthcare (16.6%), Financial Services (8.9%), IT (7.5%), Commodities (6.6%), Manufacturing (5.4%), Energy (5.7%), and Utilities (3.3%).

S&P BSE Low Volatility Index has largely been skewed towards Large-caps

Historically index has not experienced significant size weight shifts. The index composition has been predominantly large caps stocks with index weight in excess of 66% while mid-caps govern rest of the index.

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