Motilal Oswal Introduces Multi Factor Passive FoF Scheme

Motilal Oswal Mutual Fund (MOMF) has announced the launch of its latest New Fund Offer (NFO), Motilal Oswal Multi Factor Passive Fund of Funds. The scheme is an open-ended Fund of Funds investing in units of passively managed factor-based ETFs and/or Index Funds, designed to provide diversified exposure across four investment factors — Value, Quality, Low Volatility, and Momentum — through a disciplined, rules-driven equal-weight framework.

The Motilal Oswal Multi Factor Passive Fund of Funds addresses a key challenge in equity investing: predicting which factor will outperform next. Factors represent measurable stock characteristics that have historically been associated with differences in returns relative to the broader market. Leadership among factors may rotate over time, making timing difficult and potentially increasing transaction costs, taxes, and behavioral biases.

The scheme adopts a systematic strategy: equal 25% allocation to each factor (Momentum: Nifty 500 Momentum 50 Indices, Quality’s Quality, Low Volatility: BSE Low Volatility, and Value: BSE Enhanced Value). Allocations are reviewed quarterly and rebalanced only if any factor deviates by ±5% from its target, embedding a disciplined "buy low, sell high" mechanism without discretionary calls. The selection of factors and the strategy adopted shall be at the discretion of the Fund Manager, in accordance with the scheme’s investment objective as stated in the Scheme Information Document (SID).  Factors exhibit low correlation and minimal stock overlap, ensuring true diversification and smoother risk-adjusted returns.

According to MOAMC's internal research, factor leadership cycles have rotated over time — with Momentum tending to drive returns in bull phases, Value showing strength in recoveries, and Quality/Low Volatility providing relative stability during market stress. A diversified, equal-weight multi-factor approach is intended to provide broad exposure across these factor behaviors rather than depend on timing decisions.

Historical observations indicate that individual factors have shown outperformance relative to the Nifty 200 over a 15-year period, though with varying performance across cycles, and factor volatility may differ in isolation. The Motilal Oswal Multi Factor Passive FoF is structured to provide systematic exposure across multiple factors reflecting diversification through low factor correlations and minimal stock overlap.

Pratik Oswal, Chief of Business – Passive Funds, Motilal Oswal Asset Management Company Limited (‘MOAMC’) said, “Factor investing combines rule-based investing with diversified exposure across factors. The Motilal Oswal Multi Factor Passive Fund of Funds allocates equally across four factors, reducing reliance on any single factor at a point in time. It's a transparent and cost-efficient, and seeks to provide diversified factor exposure within a structured framework.”