Motilal Oswal Asset Management

About

  • Motilal Oswal Asset Management Company Ltd. is a Mumbai based AMC. It was incorporated in 2008 under the Companies Act of 1956. It is promoted and sponsored by Motilal Oswal Financial Services Ltd. 
  • The AMC has a total asset under management of over Rs. 45,492 crores as of March 2021 with Portfolio Management Services AUM over Rs. 14,700 crores, Mutual Fund AUM over Rs. 28,136 crores and AIF AUM over Rs. 2,656 crores.
  • Motilal Oswal Mutual Fund has active operations in over 600 locations across the country. With over 9 Lakh registered clients and over 2400 office premises, Motilal Oswal has a diversified portfolio of financial services under its belt. Their range of products encompasses everything from equity, debt, large and mid-cap funds, funds of funds, to name a few.   

Key staff

  • Navin Agarwal is the Managing Director and Chief Executive Officer of Motilal Oswal Asset Management Company Limited (MOAMC). Prior to joining MOAMC, he was the Managing Director of Motilal Oswal Financial Services Limited. He joined Motilal Oswal Group in 2000 and has been responsible for building as well as running various businesses over the last two decades. Navin Agarwal is affiliated with Institute of Chartered Accountants of India, Institute of Cost and Works Accountant of India, Institute of Company Secretaries of India and CFA Institute, Virginia.
  • Raamdeo Agrawal is the Chairman of Motilal Oswal Financial Services Limited (MOFSL) and the driving force behind the company’s approach to investing. As the Chairman, he has created the “QGLP” (Quality Growth Longevity & favorable Price) Investment Process and its ‘Buy Right, Sit Tight’ investing philosophy. He is an Associate of Institute of Chartered Accountant of India and a member of the National Committee on Capital Markets of the Confederation of Indian Industry. 
  • Siddharth Bothra has an experience of more than 13 years in the field of research and investments. He is the fund manager of Motilal Oswal Focused 25 Fund. He has also worked with broking outfits like Alchemy Share & Stocks and VCK Share & Stocks in the past. He holds an honors degree of MBA (Post Graduate Program) from ISB (Indian School of Business, Hyderabad), MBA International Student Exchange NYU Stern School of Business (New York) and B.Com (Honors).
  • Manish Sonthalia serves as the Chief Investment Officer and the Director of the India Zen Fund along with which he heads the Equity Portfolio Management Services at Motilal Oswal Asset Management. He has over 11 years of experience with Motilal Oswal. He founded the Wide Angle Financial Services Ltd in 1995. He has previously worked with United Credit Securities Ltd, SKP Securities Ltd and Wealth Management Advisory Services Ltd. He holds a B.Com (Hons) from St. Xavier’s College, Kolkata and is a member of The Institute of Cost & Works Account of India, The Institute of Chartered Accountants of India and The Institute of Company Secretaries of India. He has completed his Masters of Business Administration in Finance from IISWBM.
  • Abhiroop Mukherjee is the Associate Vice President and Fund Manager of Fixed Income. He brings with him over 6 years of experience in Fixed Income Securities trading. Prior to joining Motilal Oswal AMC he has worked with PNB Gilts Ltd. in Mumbai. He is a PGPBF (Finance) from National Institute of Bank Management and a B.Com (Honours) graduate from Calcutta University.

Investment Philosophy (for firm)

The recommended way to Create Wealth from equity –‘Buy Right : Sit Tight’

‘Buy Right’ means buying quality companies at a reasonable price and ‘Sit Tight’ means staying invested in them for a longer time to realise the full growth potential of the stocks.

It is a known fact that good quality companies are in business for decades but views about these companies change every year, every quarter, every month and sometimes every day! While many of you get the first part of identifying good quality stocks, most don’t stay invested for a long enough time. The temptation to book profits at 25% or 50% or even 100% returns in a 1 to 3 year period is so natural that you miss out on the chance of generating substantial wealth that typically happens over the long term; say a 10 year period.

‘Buy Right : Sit Tight’ philosophy emerged from the expertise of our sponsor Motilal Oswal Securities Ltd. that experience in equity market research and advisory since 1987. This philosophy drives all our equity products and offerings; be it Mutual Fund or Portfolio Management Services.

  • Buy Right:
  • Q-G-L-P approach to buying right stocks
  • Q:  Quality of business and management
  • G:  Growth in earnings and sustained ROE
  • L: Longevity of the competitive advantage / economic moat of the business
  • P: Buying a good business for a fair price rather than buying a fair business for a good price.
  • Sit Tight:
  • Focus and Discipline
  • Buy and Hold: We are strictly buy and hold investors and believe that picking the right business needs skill and holding onto these businesses to enable our investors to benefit from the entire growth cycle, needs even more skill.
  • Focus: Our portfolios are high conviction portfolios with 20 to 25 stocks being our ideal number. We believe in adequate diversification but over-diversification results in diluting returns for our investors and adding market risk. ‌

Media

Title- “Stay with quality, Stay with growth”- Aashish Somaiyaa

Platform– Value Research, Date– December 21, 2017

Linkhttps://www.valueresearchonline.com/stories/34877/stay-with-quality-stay-with-growth

Summary- “Digitalization, less cash, tax compliance, change in age profile of average investors, huge investor-awareness activity by the industry – all this is a confluence of factors resulting in the inflection we seem to have passed.” says Aashish Somaiyaa, the former MD and CEO of Motilal Oswal AMC. 

  • Managing return expectations- As a house they desist from giving market views because they distract investors and advisors from the real purpose and he believes that the only way to set right expectations is to allow clients and distributors to manage the right allocation. 
  • Risk controls- Since they stick to growth-oriented sectors and companies, they have witnessed that in many cases the market seems to be rewarding stocks faster than one would normally anticipate while buying and hence, profit booking has gone up. So, they are ensuring that in terms of the combination of earnings growth of the portfolio and valuations, they are on a better intersection than where the broader market has been. They like to stay with quality and growth and keep portfolio-level valuations in check.
  • Rising industry assets- As a house they are sensitive to the capacity of the products they manage and they regularly monitor how much they can manage, given their high-quality, high-growth investment objectives. If they see performance being impacted, they do not hesitate to gate the fund concerned. Also, at regular intervals they are seeing some brilliant businesses coming to raise capital.
  • Growing clout of domestic funds vis-a-vis FIIs- He thinks given the flow of numbers, changing equity holding of mutual funds and retail adoption of activities on an incremental-flow basis, Indian mutual funds are becoming material participants.
  • Outlook for equity and debt- They believe that the consumer-sector companies, private financial services, oil-marketing companies etc, will continue to show profitable growth. A wider earning recovery will take time to gather steam. Also, high trailing PEs need to be seen more as they were in 2004 and 2011, rather than in 2007.

Topic- Investing in international funds- Aashish Somaiyaa 

Platform- The Economic Times, Date- June 11, 2020

Link- https://economictimes.indiatimes.com/mf/analysis/new-love-for-international-funds-is-related-to-disappointment-with-indian-equities/articleshow/76317044.cms

Summary- In this interview, Aashish Somaiyaa, the former MD and CEO of Motilal Oswal AMC talks about everyone’s interest in overseas funds. Everyone wants to invest in international funds and everybody is also recommending them. International funds should be bought because of low correlation to India and asset classes within India and they should be bought to benefit from growth of businesses which we cannot otherwise access in Indian capital markets. At Motilal Oswal AMC, international fund offering has existed since 2012, but about everyone wanting to invest in them, his apprehension is that a good part of this new found interest in international funds is related to disappointment with Indian equities and relatively great looking report cards on international funds. One has to look at it on merit in light of their own portfolio objectives, prime one being enhancing returns while reducing risk. Bulk of the exposure should be to the developed world because that gives highest currency diversification, geographic diversification and growth opportunities that are otherwise not available in India. A narrow single country or sectoral exposures should be clearly avoided. He also clarified why Motilal Oswal offers only passive international funds. That is because they are building an entire bouquet of passive funds in preparation for a world view where they believe that index funds will gain traction not for obvious reasons like alpha or lack of alpha, but because of simplicity, ease of choice and sticking to decisions, preferences of a minimalist thought process etc. There have been multiple time windows where Indian markets don’t do as well as other markets. Also, investing is not just about chasing returns, it also calls for optimizing return to take least possible risk which is where having other asset classes, geographies and currencies is a must. 

Analyst questions

  1. Your philosophy of “Buy right, Sit tight” suggests to hold the stocks for long term in the portfolio so how and when do you plan to change the stocks from the portfolio? What triggers a change?
  2. Does the firm source sell side research? If yes, where does it add value?
  3. How has keeping the same investment style over the years helped you?
  4. Is this investment philosophy relevant every time?
  5. When your top holding falls 20-30%, how do you maintain patience and what do you do to keep the conviction? 
  6. When a scheme managed by a fund manager underperforms, how does this affect the remuneration of the fund manager?
  7. What is your criteria for initial consideration of stocks- top down or bottom up approach?
  8. How do you decide the weights given to different factors to be included in the portfolio?
  9. Coming to the market cap approach, there has been a wide divergence between a few select large caps and a vast number of small and mid-cap companies. So do you have a particular market cap bias in mind?
  10. There are a lot of equity hybrid funds in existence and the category seems to be almost overcrowded. How is your fund different from the rest?
  11. Some of your major funds have been underperforming, so what factors would you attribute to this and have you made any changes to your approach?
  12. Most investment experts say developed markets are unlikely to beat emerging markets like India. What is your view on this?

Prepared by- Kritika Agarwal, May 2021

2020 analysis

  1. Your philosophy of BUY RIGHT , SIT TIGHT suggests to hold the stocks for long term in the portfolio so how and when you plan to change the stocks from the portfolio ? what triggers a change ? 
  1. Is this investment philosophy relevant every time ?
  1. Motilal oswal have a wonderful past record so how you manage to perform above the benchmark in these turbulent times?
  1. You have mentioned a allocation limit for cash & cash equivalent i.e 10%  in the presentation for Motilal oswal midcap 30 but the actual allocation is more than 15 % , can you explain it ?
  1. In most of the fund there is a mix of debt and equity , is there any portfolio with 100 % invested in equities ? If no, then why ?
  1. Generally each and every fund shows negative return for 1 year, why is that so?  
  1. Does your dynamic funds contradicts your investment philosophy ? ‌

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