Motilal Oswal Asset Management Company has introduced a new fund offer (NFO) for Motilal Oswal S&P BSE Healthcare ETF on July 14. The issue will remain open till July 22. It is an open ended scheme tracking the S&P BSE Healthcare Total Return Index.
Before we proceed, let us first deconstruct the concept of a new fund offer and exchange traded fund.
New Fund Offer
A New Fund Offer (NFO) is the process through which an asset management company (AMC) creates a new fund on a first-subscription basis to facilitate the purchase of securities.
The fund house collects funds from the general public through an NFO in order to buy securities such as equity shares, bonds, and other financial instruments on the market. As a newcomer to the market, NFO is less expensive than the current funds.
Exchange Traded Fund
An Exchange Traded Fund (ETF) is a combination of securities that trade on the stock exchange in small tradeable units just like a stock. The first-time investors see them as experimental investment options since they carry little risk because of a diversified portfolio.
These funds are seen as attractive investment bets given their low cost, stock-like features as well as the tax exemption which some categories of ETFs offer.
Fund Overview
According to the AMC, the S&P BSE Healthcare Total Return Index is designed to provide investors exposure to companies included in the S&P BSE All Cap that are classified as members of the healthcare sector and it is reconstituted annually in September.
At present, the index is composed of 97 constituents spanning Pharmaceuticals, Hospitals, Diagnostic, Medical Equipment etc. This covers more than 99 percent of the listed Healthcare universe in terms of market capitalization.
As of June 2022, the index constituents feature Sun Pharmaceuticals Industries Ltd, Dr. Reddy’s Laboratories Ltd, Cipla Ltd., Divis Laboratories Ltd. and Apollo Hospitals Enterprise Ltd. The top 10 stocks account for close to 62 percent of weight in the index.
In terms of industry breakup – Pharmaceutical is the largest with its weight close to 81 percent followed by Hospitals 14 percent and Healthcare Services 3% forming into the top 3. The index offers healthy exposure to mid and small-size Healthcare companies with the majority weight going to large-cap companies.
Navin Agarwal, MD & CEO, Motilal Oswal Asset Management Company Ltd said, “We target to provide options of passive funds across key segments. The healthcare industry has grown 14x in the past 14 years and may continue growing rapidly on the back of increased insurance adoption, medical tourism, and rising incomes.”
He added further that “The pandemic has reinforced the importance of healthcare facilities in India. Government’s plan to ramp up spending and provide healthcare facilities to the economically weaker section will also boost the domestic healthcare sector.”
The S&P BSE Healthcare Total Return Index noted CAGR of 13.1 percent vs S&P BSE AllCap Index 10.6 percent, outperforming the broad market by more than 2 percent. Similarly, on a calendar year basis the index noted outperformance for 8 out of the last 14 calendar years vs S&P BSE AllCap Index.
“By covering 99 percent of the healthcare universe, the Motilal Oswal S&P BSE Healthcare ETF offers the broadest exposure among its peers at a lower expense ratio,” said Pratik Oswal, Head of Passive Funds, Motilal Oswal Asset Management Company Ltd.
Ten healthcare funds that demonstrated best performance in past three years
| Name of the schemes | 3 year trailing returns (%) |
| Mirae Asset Healthcare Fund-Reg(G) | 27.93 |
| Mirae Asset Healthcare Fund-Reg(IDCW) | 27.92 |
| DSP Healthcare Fund-Reg(IDCW) | 26.56 |
| DSP Healthcare Fund-Reg(G) | 26.55 |
| ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund-(G) | 24.71 |
| ICICI Pru Pharma Healthcare & Diagnostics (P.H.D) Fund-(IDCW) | 24.69 |
| Nippon India Pharma Fund(G) | 24.16 |
| SBI Healthcare Opp Fund-Reg(IDCW) | 24.11 |
| SBI Healthcare Opp Fund-Reg(G) | 24.11 |
| Nippon India Pharma Fund(IDCW) | 23.76 |
(Source - FundsIndia, July 18, 2022)
During the new fund offer investors can invest minimum Rs. 500 and in multiples of Re. 1 thereafter. On an ongoing basis investors can purchase or redeem units of the scheme through financial advisor or by log-in to www.motilaloswalmf.com.
After the new fund offer, investors can buy or sell units of the units of the scheme in round lot of 1 unit and in multiples thereafter on the exchange or they can approach Motilal Oswal Mutual fund for subscription or redemption in excess of ₹25 crores.
