Motilal Oswal to launch S&P BSE Low Volatility ETF and Index Fund
Premium- The low volatility strategy involves buying stocks that have higher stability in price movements based on past returns.
Motilal Oswal Asset Management Company has announced the launch of a low-volatility factor-based exchange-traded fund (ETF) and index fund — Motilal Oswal S&P BSE Low Volatility ETF and Motilal Oswal S&P BSE Low Volatility Index Fund.
These are open-ended schemes replicating or 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 new fund offers of Motilal Oswal S&P BSE Low Volatility ETF and Motilal Oswal S&P BSE Low Volatility Index Fund will open for subscription on 4 March and close on 16 March.
The S&P BSE Low Volatility Index selects 30 least volatile companies as defined in the index methodology. The constituents need to be part of 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.
As per the fund house, the S&P BSE Low Volatility Total Return Index (TRI) has significantly outperformed the S&P BSE LargeMidCap TRI over the last 15 years. The index has outperformed the S&P BSE LargeMidCap TRI in nine out of last 16 calendar years. As compared to Nifty50, 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.
Navin Agarwal, MD and CEO, Motilal Oswal AMC, “The Motilal Oswal S&P BSE Low Volatility Index Fund is a good starting point for an investor who’s looking for maximum wealth creation with minimal risk in a highly volatile market."
As per data available with Asia Index Pvt Ltd as of 28 February 2022, the average three-year rolling return of S&P BSE Low Volatility TRI (+16.5%) has outperformed S&P BSE LargeMidCap TRI (+11.3%) by 5.2%.
In terms of index composition, the top 10 stocks constitute nearly 39.3% of the S&P BSE Low Volatility Index weight. 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%).
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Historically, the 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.
Pratik Oswal, head of passive funds, Motilal Oswal AMC, said, “Research has shown that the strategy of buying low-volatility stocks tends to outperform the broad market over the long-term. The low volatility strategy tends to be the most effective during weak market conditions. Investors that are worried about the volatility in equity markets could consider investing in our low-cost Low Volatility ETF & Index Fund."
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