Motilal Oswal Nifty 500 Momentum 50 ETF Units Exchange Traded Fund · NSE:MOMENTUM50
Motilal Oswal Nifty 500 Momentum 50 ETF Units Exchange Traded Fund — Motilal Oswal Asset Management Company — Investor Presentation (August 2024)
55 slides from Motilal Oswal Nifty 500 Momentum 50 ETF Units Exchange Traded Fund's investor presentation, Aug 1, 2024
Slide 1: Motilal Oswal Hedged Equity Multifactor Strategy AIF
MOTILAL OSWAL HEDGED EQUITY MULTIFACTOR STRATEGY AIF
Slide 2: Why Motilal Oswal AMC?
Mi QUANT WHY MOTILAL OSWAL AMC? ee ( Cornerstone of Investment Philosophy Focused Strategies Quant/Factor based Strategies —_Index-based Strategies Based on time tested AIF and PMS based on Factor Investing Index Funds and ETFs investment framework based on first — of P=, £ 3 /~ Systematic ‘stematic
Slide 3: Quant is an Opportunity
QUANT IS AN OPPORTUNITY : rs ASSET MANAGEMENT Factor Investing commands a global stage Assets (USD Billons) mUS mCanada mEurope mAPAC Assets of $1.56 Tn invested in Smart Beta ETFs listed globally at the end of February’24 YTD Net inflows of $11.73 Bn in 2024 are the 8th highest on record Source: Mo
Slide 4: Quant is Mainstream Globally
QUANT IS MAINSTREAM GLOB | Moma Oswas PRGA 6 out of top 10 global hedge funds by AUM are quant-based with decades of track record. Quant in India is growing fast with very few unique propositions available. Top U.S. Hedge Funds AUM (USD Bn) Bridgewater Associates $124 Renaissance Technologies $106 A
Slide 5: Why MO Quant?
WHY MO QUANT? [ior ons FS EXPERIENCED TEAM IN QUANT INVESTING Decades of global and Indian factor investing expertise Clear portfolio vision with rule-based, human bias-free strategies. Proven factor strategies for high returns, backed by live performance. EXCLUSIVE OFFERINGS, NO COMPARISONS Unique
Slide 6: Our Flagship Offerings
OUR FLAGSHIP OFFERINGS M ous INVESTING ASSET MANAGEMENT ( MOTILAL OSWAL MULTIFACTOR —) ( MOTILAL OSWAL LONG-SHORT =) HedgedLong-only (£ « WR oe. . pure alpha strategy all ~~ eS “# Long — short Risk Reduction strategy Aims to combine multiple factors to deliver high risk-adjusted return over the mark
Slide 7: HEADLINE HERE
HEADLINE HERE
Slide 8: The Team
THE TEAM M aa ASSET MANAGEMENT Raamdeo Agrawal is the Co-Founder of Motilal Oswal Financial Services Limited (MOFSL) As Chairman of Motilal Oswal Asset Management Company, he has been instrumental in evolving the investment management philosophy and framework He has also authored the Art of Wealth C
Slide 9: Key Personnel
Key Personnel Bijon Pani, Ph.D. Pratik Oswal Devanshu Tayal, CFA, FRM Sr. Fund Manager – Quant Investments Chief – Passive Business Co-Fund Manager Bijon Pani, with 12+ years global and Pratik Oswal leads Motilal Oswal Devanshu Tayal has an Indian quant investment experience, leads Mutual Fund’s pas
Slide 10: Introduction to Factor Investing
INTRODUCTION TO FACTOR INVESTING | Moma Oswa, Fy (i } {it i | Motil} | It (1 0 IT IL} | Iota AT 7 a i | i) a T !
Slide 11: Factors Behind a Blockbuster Movie
FACTORS BEHIND A BLOCKBUSTER MOVIE i ie ASSET MANAGEMENT The success of a blockbuster movie can be broken down in terms of a combination of “Factors” such as — Blockbuster Movie
Slide 12: Factors Behind a Robust Portfolio
FACTORS BEHIND A ROBUST PORTFOLIO i rs ASSET MANAGEMENT Similarly, the returns of a portfolio can be explained in terms of a combination of “Factors” — PRICE / BV Portfolio
Slide 13: Are You a Factor Investor?
ARE YOU A FACTOR INVESTOR? i ie ASSET MANAGEMENT Do you look for one or more of the following when selecting which stocks to invest in? a PIB, ROE, sDIVIDEND YIELD ROA. Die PRICE TREND wi PRICES \\
Slide 14: Why Factors Matter?
WHY FACTORS MATTER? Portfolio Return O {> YU Pre 1960s 1960s - 1990s QUANT INVESTING
Slide 15: Factor Investing: Best of Both Worlds
FACTOR INVESTING — BEST OF BOTH WORLDS ere Oo ES "Elevate Your Portfolio: Factor Investing Bridges Active and Passive Strategies, Offering Disciplined Alpha Generation and High-Risk Adjusted Returns. Passive Investing Factor Investing Active Investing Rules-based & Di ti Transparent eee nly Investme
Slide 16: To Err Is Human!
TO ERR IS HUMAN ! Pion Oo Confirmation Bias Hindsight Bias Gambler’s Fallacy Status Quo Bias Survivorship Bias Self Attribution Bias Asystematic rules based approach helps eliminate cognitive errors and behavioural biases exhibited by investors
Slide 17: Commonly Used Factors
COMMONLY USED ” = ASSET MANAGEMENT Momentum 12 M Returns, 6 M Returns Quality Leverage, Profitability Volatility Value Beta, Standard Deviation Price / Book, Price / Earnings, Dividend Yield Source/Disclaimer: MSCI; The above infographic is used to explain the concept of factors and is for illustrat
Slide 18: The Quality Factor
Me ASSET MANAGEMENT THE QUALITY FACTOR The Quality Factor captures companies with durable business models and sustainable competitive advantages Selects stocks that have high RoE, high cashflows, low debt Provides downside protection during market crashes These businesses have strong & lasting compe
Slide 19: The Value Factor
Me ASSET MANAGEMENT THE VALUE FACTOR The Value Factor captures stocks that are relatively ‘inexpensive’ compared to their fundamentals attributes Selects “cheaper” stocks that have low P/E, P/B, and P/S Works well during market recovery Offers diversification benefit vs other Factors Staging a turna
Slide 20: The Low Volatility Factor
ve ASSET MANAGEMENT THE LOW VOLATILITY FACTOR The Low Volatility Factor involves buying stocks which have higher stability in price movements Selects stock with lower volatility in price movements Provides downside protection during market crashes Good starting point for investors worried about mark
Slide 21: The Momentum Factor
THE MOMENTUM FACTOR iH ee ASSET MANAGEMENT The Momentum factor exploits the tendency of winning stocks to continue performing well in the near term Selects stock with strong recent performance Works well in sustained Bull markets Works across market cap, sector & time period Quickly catches on to Se
Slide 22: Different Factors Work in Different Market Cycles
DIFFERENT TORS WORK IN DIFFERENT MARKET CYCLES Me ASSET MANAGEMENT QUANT INVESTING Bull 33.3% 27.0% 27.2% 38.5% 27.3% Bear -48.9% -27.1% -25.6% -38.3% -38.8% Recovery 45.1% 41.0% 37.8% 38.6% 34.2% e Momentum tends to significantly outperform in Bull market cycles e Quality and Low Vol offer good dow
Slide 23: Applications of Factor Investing
APPLICATIONS OF FACTOR INVESTING CA irs Use of single factor indexes to factor tilt portfolios and incorporate short term views in order to improve performance Strategic Risk Management
Slide 24: HEADLINE HERE
CITT) CUUTTID | ) 1) cz CI C1 ca ) CLirD Chin) Cini Chitin CUT w wm Lu oO oo [aad ao — = Lu = — i“e) Lui > = ce => oO
Slide 25: Four Types of Market Cycles
FOUR TYPES OF MARKET CYCLES
Slide 26: Market Cycle 1: Bear Markets
MARKET CYCLE 1: BEAR MARKETS I Bear Markets
Slide 27: Solution: Quality
OLUTION: QUALITY | Moras Osway FR ASSET MANAGEMENT Figure: Average quarterly performance of the Quality Factor during a bear market Quality Market 0% -6% On average, the Quality factor does well in a bear market as the companies represented are ones with lower leverage and high profitability. Indica
Slide 28: Market Cycle 2: Recovery Markets
MARKET CYCLE 2: RECOVERY MARKETS NZ Bear Markets Recovery Markets Source/Disclaimer: MOAMC Research,
Slide 29: Solution: Value Factor
SOLUTION: VALUE FACTOR 0 ASSET MANAGEMENT Figure: Average quarterly performance of the Value factor during a recovery 10% 0% Value Market On average, the Value factor does well in a market recovery as it is most likely to participate in broader economic growth. Indicators: Price-to-Earnings (P/E), P
Slide 30: Market Cycle 3: Bull Markets
MARKET CYCLE 3: BULL MARKETS Bull Markets Bear Markets
Slide 31: Solution: Momentum Factor
SOLUTION: MOMENTUM FACTOR rs ASSET MANAGEMENT Figure: Average quarterly performance of the Momentum factor during a bull market 10% 0% Momentum Market On average, the Momentum factor does well in a bull market because it benefits from underlying trends. Indicators: 12M Performance Source/Disclaimer:
Slide 32: Market Cycle 4: Market Crash
MARKET CYCLE 4: MARKET CRASH Bear Markets Recovery MA, Markets Market Crash
Slide 33: Asset Diversification May Not Work in a Crash
ASSET DIVERSIFICATION MAY NOT WORK IN A CRAS z rs ASSET MANAGEMENT Figure: Peak-to-Trough Drawdowns for Asset Classes during GFC -59% -48% -54% -21% Domestic Equity US Equity International Equity Gold -25% -22% -64% -23% Commodities Private Equity Real Estate High Yield Source/Disclaimer: Attain Alt
Slide 34: Volatility Always Rises in a Market Crash
VOLATILITY ALWAYS RISES IN A MARKET CRASH Ms rs ASSET MANAGEMENT Figure: India Volatility Index Covid Crash 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 2021 Source/Disclaimer: niftyindices. Data from 31-Dec-08 to 31-Dec-21. Volatility Index — Nifty India VIX Index. The above graph is
Slide 35: Combining All Cycles
COMBINING ALL CYCLES _ Noman FO Volatility For illustration purpose only
Slide 36: Combining All Factors
COMBINING ALL FACTORS Motilal Oswal Hedged Equity Multifactor Strategy AIF (HEMSA)
Slide 37: Unlocking Potential: The Logic Behind Multi-Factor Investing
Me QUANT UNLOCKING POTENTIAL: THE LOGIC BEHIND MULTI-FACTOR INVESTING Mvmmeo=™ sc. A Multi-Factor approach to Factor investing helps reduce Factor-specific risk without compromising on long-term performance Factor timing can be difficult Factor timing, just like market timing, can be incredibly diff
Slide 38: Our Fund Specifications
OUR FUND SPECIFICATIONS i re ASSET MANAGEMENT Source/Disclaimer: MOAMC Research,NSE. The performance for Motilal Oswal long short is backtested since 2005. Performance results have many inherent limitations and no representa- tion is being made that any investor will, or is likely to achieve. Past p
Slide 39: Portfolio Structure
ASSET MANAGEMENT iL PORTFOLIO STRUCTURE | boo The portfolio allocates to two distinct models with 75% to Sleeve 1 and 25% to Sleeve 2. ————® Sleeve 1 High Quality companies with Value and Momentum =f- (75%) Sleeve 2 e—----Seaa Source/Disclaimer: MOAMC Research
Slide 40: HEMSA Stock Selection Framework – Sleeve 1 (75%)
HEMSA Stock Selection Framework – Sleeve 1 (75%) Restrict Universe from 51-300 Opportunity Universe by Market Capitalization ~Top 75 companies selected Apply Quality Filter based on Quality Filter Select Companies ~Top 20 company portfolio based on Value and based on Value & Momentum Momentum Final
Slide 41: HEMSA Stock Selection Framework – Sleeve 2 (25%)
HEMSA STOCK SELECTION FRAMEWORK — SLEEVE 2 (257) m she ASSET MANAGEMENT Opportunity Universe Restrict Universe from 51-300 by Market Capitalization Eliminate top 10% highest volatile companies’ basis Eliminate high inverted low volatility score volatility co’s Select Companies ~20 company portfolio
Slide 42: Unique Characteristics of the Multi-Factor Portfolio
UNIQUE CHARACTERISTICS OF THE MULTI-FACTOR PORTFOLIO Ms rs ASSET MANAGEMENT Adaptive portfolio - Quarterly churn leading to portfolio positioning for changing market conditions (Churn Rate: ~140% p.a.) Style diversification - use of multiple factors simultaneously Steep drawdown protection - through
Slide 43: Unique Characteristics of the Hedging Strategy
UNIQUE CHARACTERISTICS OF THE HEDGING STRATEGY Ms rs ASSET MANAGEMENT Model based- combination of long & short PUT options Does not provide protection for small market corrections Cost Effective Hedging — allows to remain hedged at all times Avoids return drag during upward trending markets Provides
Slide 44: Performance Characteristics
PERFORMANCE CHARACTERISTICS Mt re ASSET MANAGEMENT Source/Disclaimer: MOAMC Research,NSE. Performance results have many inherent limitations and no representation is being made that any investor will, or is likely to achieve. Past performance may or may not be sustained in future. The above graph is
Slide 45: Portfolio Performance
LIO - PERFORMANCE Mi a ASSET MANAGEMENT Combination of Multifactor investing and Hedging enables relatively better performance across all market cycles Performance across market cycles m@HEMSA_ @ Nifty 500 TRI 46.1% 39.7% -37.4% Bull Bear Recovery Crash Source/Disclaimer: NSE, MOAMC Research. Perfor
Slide 46: Calendar Year Performance
Me QUANT CALENDAR YEAR PE —! m= Hedged Equity Multifactor = Nifty 500 TRI 84.1% 85.3% 76.2% 62.3% 37.3% 39.3% ° 33.5% ° 37.7% 31.6% i) 23.5% 17.9% | 16.1% 14.3% 9.8% 9.0% o : 4.8% i 0.2% fll 5.1% i | = 2.1% 6.7% 2017 2018 2019 2020 2021 2012 2013 2014 2015 2016 Source/Disclaimer: www.niftyindices.co
Slide 47: Rolling Year Returns
ROLLING 3 YEAR RETURNS | Moma: sway FPS ASSET MANAGEMENT Hedged Equity Parameter Multifactor NIFTY 500 TRI Average 28.1% 12.1% Median 26.5% 12.2% Min 8.4% -9.4% Max 54.2% 25.1% Distribution of Returns Negative 0.0% | 5.4% 0% to 10% 1.1% 23.8% 10% to 20% 26.5% 64.8% > 20% 72.4% 6.0% Over last 10 year
Slide 48: Compounding Effect of Downside Protection
COMPOUNDING EFFECT OF DOWNSIDE PROTECTION z ee ASSET MANAGEMENT Tail Hedging not ony has the potential to protect the portfolio from severe losses but also provides capital to invest in market lows. (e.g. Covid crash) = Nifty 500 TRI = Unhedged Multifactor =» Hedged Multifactor 76.2% 65.8% 67.5% 69.
Slide 49: Case for Tail Hedging
Me QUANT ASE FOR TAIL HEDGING Moma. Osmy EM Infrequent Severe These tail events have contributed to ~55% of all losses. Since 2006, there have been just 2 tail events. Unpredictable Tail events are extremely difficult to time. Hedging against tail-events is more ‘cost-effective’ than hedging against
Slide 50: Live Performance – Hedged Equity Multifactor AIF
LIVE PERFORMANCE –HEDGED EQUITY MULTIFACTOR AIF Multifactor AIF Nifty 500 TRI 73.8% 39.3% 39.7% 33.2% 27.8% 29.6% 20.9% 19.5% 21.9% 21.7% 16.2% 12.6% 8.4% 4.4% 1M 3M 6M YTD* 1Y 2Y SI Source: MOAMC Internal Research, NSE. Data as on July 24. Inception Date – 14 Feb 2022 Fund returns are post-fees (2.
Slide 51: Top Holdings
HEADLINE HERE SYMBOLNAME % Assets OIL INDIA LIMITED 6.4 RURAL ELECTRIFICATION CORPORATION LIMITED 5.8 NMDC LTD 4.4 PETRONET LNG LIMITED 4.3 AJANTA PHARMA LIMITED 4.1 BAYER CROPSCIENCE LTD 4.0 SUN TV NETWORK LTD. 4.0 ZYDUS LIFESCIENCES LIMITED 3.8 MRF LIMITED 3.8 ORACLE FINANCIAL SERVICES SOFTWARE LI
Slide 52: Industry and Market Cap Allocation
HEADLINE HERE Industry Allocation % Healthcare 21.7 Automobile and Auto Components 19.1 Oil, Gas & Consumable Fuels 13.2 Finance 12.9 Metals & Mining 6.1 Market Cap Allocation % Large Cap 29.2 Mid Cap 50.1 Small Cap 20.6 Source: MOAMC Internal Research, NSE. Data as on July 24. The above graph/table
Slide 53: Key Terms & Structure
KEY TERMS & STRUCTURE | Moma Oswas PRGA Class Category Type re Fixed M Fees Carry Hata Bi Open Ended Fixed 1<5 2.50% NA NA B2 Open Ended Fixed 5<15 2.00% NA NA B3 Open Ended Fixed >=15 1.50% NA NA C1 Open Ended _| Fixed+Variable 1<5 1.50% 15% 10% C2 Open Ended _ | Fixed+Variable 5<15 1.25% 15% 10% C
Slide 54: Disclaimers & Risk Factors
DISCLAIMERS & RISK FACTORS Ms ee ASSET MANAGEMENT The content is issued on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this document is for general purposes only and not a complete disclosure of every material fac
Slide 55: HEADLINE HERE
HEADLINE HERE
Motilal Oswal Asset Management Company — Investor Presentation (August 2024) on 6ix