Motilal Oswal Multi-Asset Momentum Strategy – PMS

What Is Motilal Oswal Multi-Asset Momentum Strategy?

The Motilal Oswal Multi-Asset Momentum Strategy is a discretionary Portfolio Management Service (PMS) that uses a proprietary asset-allocation model to invest across multiple asset classes. Its investment approach is based on time-series momentum, also known as trend following.

Unlike an equity-only PMS that primarily selects and manages individual stocks, this strategy looks for trends across different market segments. It uses Exchange Traded Funds (ETFs) to gain exposure to domestic equity, international equity, gold, 5-year government bonds and liquid instruments.

The objective is to deliver consistent positive returns by adjusting asset allocation according to the signals generated by its model. The strategy also incorporates mean-reversion principles when selecting ETFs and determining portfolio weights.

This makes it a distinct multi asset PMS offering within the Motilal Oswal range. Rather than relying on a fixed allocation to equity or debt, it follows a systematic approach that can change exposure as market trends evolve.

The model is rules-based for portfolio entry and exit decisions. However, momentum investing does not guarantee positive returns. Trends can reverse, signals can prove temporary, and different asset classes can experience periods of volatility or underperformance.

Motilal Oswal Multi-Asset Momentum Strategy: Fund Snapshot

How Does the Multi-Asset Momentum Strategy Work?

The Motilal Oswal momentum strategy follows time-series momentum, a methodology that evaluates an asset's own price movement over time to identify its prevailing trend.

The basic principle is straightforward: asset classes showing favourable trends may receive greater portfolio exposure, while those showing weakening trends may receive lower allocations. The model continuously uses its framework to determine how the portfolio should be positioned.

The approach has three broad stages:

• Identifying trends: The model evaluates price trends across the eligible asset classes. It looks for signals that indicate whether an asset class is gaining or losing momentum.
• Determining allocation: The proprietary model uses these signals to decide how much exposure the portfolio should have to the eligible ETFs.
• Adjusting exposure: When market trends or model signals change, the portfolio allocation can be adjusted accordingly.

The strategy combines trend-following and mean-reversion principles. Trend following helps identify the direction of an asset's movement, while mean reversion considers the possibility that prices may move back towards their historical averages.

The investment framework is developed by Motilal Oswal Asset Management Company. Its exact calculations, signal thresholds and allocation weights are proprietary.

One important feature is its 100% rules-based approach to investing. Portfolio entry and exit decisions are determined by the model without human intervention in those decisions. This reduces the influence of behavioural biases such as panic selling, emotional buying and frequent changes based on short-term market opinions.

However, a systematic model is not a market prediction tool. It responds to available signals, and those signals may sometimes be delayed or incorrect. A trend can reverse quickly, while a temporary market movement can trigger an allocation change that does not work in the portfolio's favour.

Which Asset Classes Does the Strategy Invest In?

The Motilal Oswal Multi-Asset Momentum Strategy can invest across five asset classes through ETFs. This gives the portfolio exposure to domestic and overseas markets, precious metals, government securities and liquid instruments.

Domestic equity: The strategy uses a NIFTY 50 ETF to access India's leading listed companies. This provides broad exposure to large domestic businesses without requiring the model to select individual stocks.

International equity: ETFs tracking indices such as the S&P 500, MSCI Emerging Markets and MSCI EAFE provide access to overseas markets. This expands the investment universe beyond Indian equities and introduces international market and currency exposure.

Gold: A Gold ETF gives the portfolio exposure to gold price movements. Gold may behave differently from equity and debt markets, but its price can also fluctuate and does not guarantee protection during market corrections.

5-year government bonds: A 5-year G-Sec ETF provides exposure to government securities. Its market value can change with interest rates, bond yields and prevailing debt-market conditions.

Liquid instruments: The strategy can use an available liquid ETF to access short-term market instruments. This gives the allocation model another option when its signals favour liquid exposure.

The portfolio is not required to maintain equal or fixed allocations across these asset classes. The model determines the allocation based on its proprietary framework.

ETF Selection and Portfolio Allocation Framework

The strategy uses an ETF-based PMS strategy, making asset allocation a central part of its investment process. Instead of building a conventional portfolio of individual stocks, it selects ETFs representing the eligible asset classes and determines their portfolio weights through its proprietary model.

The selection and allocation process has two distinct parts:

• ETF selection: The model identifies suitable ETFs representing domestic equity, international equity, gold, government bonds and liquid instruments.
• ETF allocation: The model determines the exposure assigned to each selected ETF using its trend-following and mean-reversion framework.

The portfolio can therefore change its exposure as market conditions evolve. For example, a stronger trend in one asset class may lead to a higher allocation, while weakening momentum may result in reduced exposure.

This approach differs from traditional asset allocation, where investors often maintain predetermined proportions of equity, debt and gold and rebalance them at fixed intervals.

The strategy's rules-based structure also reduces dependence on individual market opinions for entry and exit decisions. However, its results remain dependent on the quality of the model, market behaviour, ETF execution and the accuracy of its allocation signals.

Motilal Oswal Multi-Asset Momentum Strategy Performance

Performance is an important consideration when evaluating any momentum strategy PMS. However, the latest available performance module does not provide a published return series for this strategy.

The current performance profile displays no reported one-year or three-year return. It also states that returns have not yet been published for the strategy. Therefore, no current numerical return or meaningful performance comparison can be presented.

The benchmark currently displayed for the strategy is the NSE Multi Asset Index 2. The benchmark is intended to provide a reference for evaluating performance, rather than represent a guaranteed return or the exact portfolio allocation.

The earlier benchmark was the Nifty 50 Arbitrage Index. The updated benchmark framework, NSE Multi Asset Index, has the following stated composition:

Investors should consider performance over matching periods and against the applicable benchmark. A multi-asset strategy should not be evaluated only by comparing it with a conventional equity index, as its investment universe also includes gold, government securities and liquid instruments.

Past performance, when available, does not guarantee future results. Momentum strategies can perform differently across sustained trends, volatile markets and periods of frequent reversals.

Fees, Minimum Investment and Other PMS Terms

The minimum investment for the Motilal Oswal Multi-Asset Momentum Strategy is ₹50 lakh. This is the minimum amount applicable to the PMS offering.

The fixed management fee, performance fee and exit load are not currently disclosed in the strategy's published profile. These charges should not be assumed to be zero.

PMS investors should understand the applicable fee arrangement, expenses, exit conditions and taxation before committing capital. The actual cost of investing depends on the terms agreed under the PMS agreement.

Risks of Multi-Asset Momentum Investing

A multi-asset investment strategy can spread exposure across different market segments, but it does not eliminate investment risk. The Motilal Oswal Multi-Asset Momentum Strategy is exposed to risks arising from its underlying asset classes as well as its proprietary allocation model.

Momentum reversal risk: Momentum signals are based on prevailing trends. If an asset class changes direction suddenly, the model may respond after the reversal has already started. This can affect the portfolio's returns.

Whipsaw risk: Markets do not always move in sustained trends. During sideways or volatile periods, prices may move repeatedly in opposite directions. The model may generate signals that result in frequent allocation changes without a lasting trend.

Model risk: The strategy depends on a proprietary trend-following and mean-reversion framework. Its effectiveness depends on the model's assumptions, calculations and ability to respond to different market environments. No model can work equally well in every market cycle.

Equity market risk: Domestic and international equity ETFs remain exposed to market volatility. Economic developments, corporate earnings, interest rates, geopolitical events and investor sentiment can affect index performance.

International and currency risk: Overseas equity exposure brings additional risks. Currency movements, international economic conditions, regulatory changes and geopolitical developments can influence the value of international ETF holdings.

Gold price risk: Gold prices fluctuate in response to interest rates, currency movements, inflation expectations and global demand. Gold exposure does not guarantee gains or protect the portfolio from losses.

Interest-rate risk: The 5-year G-Sec ETF is exposed to changes in bond yields and interest rates. Bond prices generally move inversely to interest rates, which can affect the value of the portfolio's debt exposure.

ETF liquidity and execution risk: ETF trading volumes and bid-ask spreads can vary. During volatile market conditions, execution prices may differ from expected prices, affecting transaction costs and portfolio performance.

Asset-allocation risk: Different asset classes can remain out of favour for extended periods. A model may continue to hold exposure to an underperforming asset class until its signals change.

Market risk: Broad market movements can affect multiple asset classes simultaneously. Diversification can help spread exposure, but it cannot remove systematic market risk.

How to Invest in Motilal Oswal Multi-Asset Momentum Strategy?

The minimum investment is ₹50 lakh. Investors considering the strategy should first understand its multi-asset approach, medium-term investment horizon and tolerance for market fluctuations.

The usual PMS onboarding process involves:

• Reviewing the investment objective and asset-allocation framework.
• Understanding the eligible asset classes and ETF-based investment approach.
• Reviewing the applicable benchmark, fees and exit terms.
• Completing the required KYC and investor documentation.
• Executing the PMS agreement and completing the funding process.

Investors should also consider how a trend-following multi-asset strategy fits into their existing portfolio. Its exposure to international equity, gold, government securities and liquid instruments makes its risk-return profile different from that of an equity-only PMS.

How Can ALTPORT Help You Explore Motilal Oswal Multi-Asset Momentum Strategy?

Selecting a PMS requires more than looking at its investment theme. Investors need to understand the investment methodology, asset allocation, portfolio manager, benchmark, charges and associated risks.

ALTPORT is an APMI-registered investment platform that helps HNIs and other eligible investors explore PMS and alternative investment opportunities. It provides access to product information and helps investors understand different investment approaches before making an investment decision.

You can explore:

• Other Motilal Oswal PMS strategies.
• The Motilal Oswal Asset Management Company.
• The equity-focused Motilal Oswal Multifactor Equity Strategy.
• The long-term equity approach of the Motilal Oswal 25-for-25 Strategy.

Explore the Motilal Oswal Multi-Asset Momentum Strategy with ALTPORT to understand its investment approach, portfolio structure and key PMS terms.