Motilal Oswal AMC launches five-year G-Sec fund of funds
Premium- The FoF will be investing in the units of Motilal Oswal five-year G-Sec Exchange Traded Fund
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Motilal Oswal Asset Management Company (MOAMC) has launched a five-year G-sec fund of funds (FoF), which will be investing in the units of Motilal Oswal five-year G-Sec Exchange Traded Fund (ETF).
This comes after the launch of first-of-its-kind Motilal Oswal five-year G-Sec ETF last year.
The new fund offer (NFO) opened on Friday and closes on 30 September.
The asset management company has been focusing on passive funds and its total assets under management (AUM) for this category of schemes stood at around ₹12,100 crore as of August end.
“The launch of Motilal Oswal five-year G-Sec FoF is in response to growing demand from investors who do not have demat or trading accounts. With low correlation to equities, this FoF is ideal for investors looking for capital preservation with reduced portfolio volatility," Navin Agarwal, MD and CEO, Motilal Oswal Asset Management Company Ltd.
As per the fund house, with no lock-in, indexation benefit, and historical higher pre- and post-tax returns over fixed deposits, the Nifty Five Year Benchmark G-Sec Index can be good alternative to traditional fixed deposits.
“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 five-year Benchmark G-Sec Index, it falls in the sweet spot between short and long duration G-Sec."
As per regulations, the Motilal Oswal five-year G-Sec FoF will be treated as a ‘non-equity’ fund and consequently taxed similar to a debt scheme.
If the investment is held for more than three years it qualifies for long-term capital gains (LTCG) tax at 20%, along with option to avail indexation benefit. Any investment horizon lower than three years, would attract the short-term capital gains (STCG) tax and is taxed as per the applicable tax bracket.
The minimum application amount during the NFO period is ₹500. Moreover, the indicative total expense ratio of regular plan fund of fund is 0.10% per annum and of direct plan FoF is 0.03% per annum.
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