Indian investors have finally been given the opportunity to invest in U.S. stock markets. Coming on the trading session on April 15, 2020 India’s first index fund on S&P 500 – Motilal Oswal S&P 500 Index Fund, will be launched. This fund is being launched by Motilal Oswal Asset Management Company. The NFO is open for subscription between April 15 and April 23rd.
About the Index
S&P 500 Index houses the top 500 companies of the U.S. which is the world’s largest economy. Household names like Coca Cola, Apple, Facebook, Xerox, Google, Netflix, Microsoft, Disney, McDonald’s and many more are listed on the index. This is the first time an Indian investor is getting a chance to invest in a U.S. index via an index fund. Being one of the oldest indices, S&P 500 Index has a 63 year-old track record and over 40% of the companies’ sales come from overseas businesses. Hence the index has a global character. The index has the largest number of large-cap companies listed.
The index has clocked 12.7% and 17.8% compounded annual growth rate (CAGR) in five and ten years respectively in rupee terms. The fund has outperformed all Indian indices by 4-9% CAGR over the last decade.
S&P 500 Index Returns
|3 Years||<5 years||7 years||10 years|
|Returns (INR)||S&P 500 (TRI) (in % CAGR)||12.8||12.7||16.9||17.8|
|Nifty 500 TRI||7.5||6.3||12.2||9.6|
The Motilal Oswal S&P 500 Index is going to function like an open-ended index fund. Index funds are those funds that map the movements of the index. The securities of the index will not be selected by the fund manager as it will ape the movements of the index. This index fund will therefore seek to provide returns to Indian investors as and how the U.S. index is performing. This fund will have both versions: regular and direct plan.
Charges and minimum investment amount: The expense ratio for the direct plan of the fund is 0.5% and for the regular plan it is 1%. The minimum investment amount is Rs 500.
Options: The fund only has a growth option and no dividend option; this means that any money you seek to make from an investment in this fund will come from redeeming your units at higher value that your original investment value.
Investment mode: You can invest in the fund through a lump sum amount or even start a systematic investment plan (SIP) in the fund.
|Name of the Fund||Motilal Oswal S&P 500 Fund|
|Type of Scheme||Open ended Index fund|
|Benchmark||S&P 500 Index (TRI)|
|NFO Dates||Opens on 14th April 2020 and closes on 23rd April 2020|
|Total Market Capitalisation||USD 8.2 billion|
|Fund Manager||Mr Herin Visaria and Mr Abhiroop Mukherjee|
|Minimum Application Amount/Minimum Purchase Amount||Rs. 500 and in multiples of Re. 1 thereafter|
|Exit Load||1%- If redeemed on or before 3 months from the date of allotment. Nil- If redeemed after 3 months from the date of allotment.|
|Plans||Regular Plan and Direct Plan|
|Expense ratio||Regular Plan: 1% Direct Plan: 0.5%|
3.Details for SIP investment in the fund
|Weekly SIP||Rs. 500/- and multiple of Re. 1/- thereafter (Minimum Installment – 12)|
|Fortnightly SIP||Rs. 500/- and multiple of Re. 1/- thereafter (Minimum Installment – 12)|
|Monthly SIP||Rs. 500/- and multiple of Re. 1/- thereafter (Minimum Installment – 12)|
|Quarterly SIP||Rs. 1,500/- and multiple of Re. 1/- thereafter (Minimum Installment – 4)|
|Annual SIP||Rs. 6,000/- and multiple of Re. 1/- thereafter (Minimum Installment – 1)|
4.Details About The Fund Managers
Herin Visaria: Associate Vice President – Fund Manager, Fixed Income
Mr Herin Visaria is a fund manager for foreign securities at Motilal Oswal AMC. He is a third level Chartered Financial Analyst (CFA) candidate.
Before his stint at Motilal Oswal AMC, Visaria worked in the research department for institutional derivatives at Motilal Oswal Financial Services Ltd. (earlier Motilal Oswal Securities Ltd. during Visaria’s stint).
He has also worked in the sales trading department for institutional equities at Bank of Baroda Capital Markets Ltd. Apart from BOB Capital Markets, he has also worked in the dealing and sales trading department in the institutional services department for mutual funds. He has experience of over 11 years in dealing, sales trading and derivatives research.
Abhiroop Mukherjee: Associate Vice President – Fund Manager, Fixed Income
Mr Abhiroop Mukherjee specialises in fixed income securities and has experience for over 6 years. Before Motilal Oswal AMC, he worked as a wholesale debt market trader with government securities dealer- PNB Gilts Ltd. He is also the fund manager for two other funds at Motilal Oswal AMC: Motilal Oswal Most Ultra Short Term Fund and Most 10 year Gilt Fund. He holds a Post Graduate Program in Banking and Finance degree from National Institute of Bank Management.
How to Invest in this Fund on Groww ?
- Sign in to your Groww account. If you are a new user, then just sign up and complete the KYC formalities.
- Click on the link https://groww.in/nfo/motilal-oswal-s-p-500-index-fund-direct-growth
and you will be directed to the NFO page for investing.
- On the page you can find all the necessary information related to the scheme such as details about the holding, asset allocation breakup etc.
- Select whether you want to invest a lumpsum amount or start a SIP and start your investment journey!
How is Investing in an Index Fund That Maps a U.S. Index Any Different for You?
- Diversification: The launch of this NFO diversifies the investment options available for you in the market as now you can also invest in an index fund tracking a U.S. index. The companies listed on S&P 500 have a massive global outreach in terms of their customer spread and business models. This accounts for further diversification.
- Dollar hedging: Goods imported from the U.S. are becoming expensive regularly because of the appreciating dollar over rupee. Even the cost of education abroad has gone up for Indians and going forward the dollar will continue to appreciate over our domestic currency. Hence having a proportion of your portfolio in dollar-based investments might help you to hedge the losses made due to difference in currency values.
Who should Consider Investing in This Fund?
To understand if this particular fund suits you or not, we first need to understand if the larger category, index funds, is akin to your risk profile.
Index funds in general requires investors to be risk-averse. If you are an investor who does not want the pain of tracking your mutual fund and the assets it invests in, you can look at index funds as it copies the movements of the benchmark it is indexed to. Their returns are more predictable. If you want to avoid the risk of a fund manager’s decisions, you can look at an index fund because they are passively managed. Passive management means that they do not have any active involvement of the fund managers.
In this fund, the fund manager will not decide which company’s stock to buy or not. They will ape the index’s movements, which is S&P 500, exactly.
An investor who wants to be in a passively managed fund but wants international exposure and is ready to take on currency risks and understands global economic cycles can consider investing in an international index fund.
Specific to this index fund, you can invest in it if you want some exposure into the largest gauge of U.S.’s large cap equities.
Index funds, in general, do not carry many risks but when it comes to an international index fund, like this one, you do need to think of few risks.
You do need to understand the geography your fund is investing in, the stock market and the benchmark indices of that country. You will be expected to have the basic information on the international market at hand.
On a Closing Note
Investing in an index fund that houses the top 500 companies of the largest economy in the world (U.S.) does sound lucrative.
However, please ensure you read the details of the NFO carefully and invest only when the aim of the scheme aligns with your own financial objectives.
The NFO does aim to map the price movements and returns of the S&P 500 index but does not give you a guarantee to achieve the objective. Therefore you, as an investor, should conduct due diligence or consult your financial advisor to check if this suits you.
Investment in securities market are subject to market risks, read all the related documents carefully before investing. Please read the Risk Disclosure documents carefully before investing in Equity Shares, Derivatives, Mutual fund, and/or other instruments traded on the Stock Exchanges. As investments are subject to market risks and price fluctuation risk, there is no assurance or guarantee that the investment objectives shall be achieved. NBT do not guarantee any assured returns on any investments. Past performance of securities/instruments is not indicative of their future performance.