Market sentiments evolve over a period of time, and investors often realign their portfolios accordingly. Some prefer to own quality stocks for a smoother, less volatile experience and reasonable returns, while others may choose growth-oriented stocks for higher return potential. For investors looking to invest in a blend of quality and growth-oriented companies, the Motilal Oswal Flexi Cap Fund aims to build a diversified equity portfolio based on a high-quality, high-growth framework. The scheme follows a long-term investment approach with the objective of generating capital appreciation, subject to market risks. Let’s take a closer look at the investment philosophy behind the scheme.
Investment strategies followed by institutional investors, including asset managers in India, often revolve around specific factors. For example, some focus on value investing as their core philosophy, while others may emphasize growth. Similarly, some construct portfolios based on factors such as low volatility, quality or momentum. Among these, quality and growth have gained popularity in the Indian market. However, in practice, many investment processes tend to emphasize one of these factors more than the other, resulting in a focused approach to portfolio construction.
However, while managing Motilal Oswal Flexi Cap Fund, the fund managers follow a proprietary investment framework known as QGLP – which stands for quality, growth, longevity and price. Under this framework, businesses with return on equity (ROE) or return on capital employed (ROCE) above certain thresholds are considered quality businesses (Q). High ROE or ROCE may result from factors such as pricing power, access to cost efficient technology, a differentiated product offering or expanding market presence. These high-quality businesses are further assessed for their potential to generate earnings growth over long period of time (GL) based on themes identified by the investment team. In addition, the fund managers evaluate valuation metrics to ensure that investments are made with price discipline (P), in line with the fund’s investment philosophy.
The fund managers have identified structural themes such as China+1, Make in India, Financialisation, Tech & Tech services, urbanisation, healthcare ecosystem and telecom, which are believed to offer sustainable growth potential over time. At least 65% of Motilal Oswal Flexi Cap Fund’s assets are invested in stocks that fit in these themes. This approach aims to provide investors with exposure to companies that may have the potential to emerge long-term value. The current portfolio is positioned in alignment with themes that could benefit from an ongoing economic recovery. Historically, high-quality stocks have tended to recover early during market rebounds, as investors often view them as relatively resilient uncertain environment. High-growth stocks may follow, as investors seek to participate in the potential market upside. The portfolio includes companies that exhibit both quality and growth characteristics, which the fund managers believe may deliver strong returns over the medium to long term.
The investment strategy focusing on high quality and high growth leads the fund managers to steer clear of seasonal performers. The fund managers evaluate only those companies that are likely to post consistent growth. Also, high quality companies with muted earnings growth often do not make it into the portfolio. The portfolio is carefully curated by the fund managers, who leverage the flexibility of the flexi-cap structure to invest across sectors and company sizes—large, mid, and small-cap. The investment ideas are identified and bunched together to form a focused, high conviction portfolio by the fund managers. Together with the in-house team of investment professionals, the fund managers closely monitor the portfolio companies’ performance with reference to management commentary and business outlook. The portfolio is reviewed regularly, and allocation decisions are adjusted as per the fund managers’ ongoing assessment of risk and return potential. A high-quality, high-growth flexi cap equity portfolio can help create long-term compounder. Regular investments in this scheme can help fund long term financial goals such as retirement or purchasing a second home. Motilal Oswal Flexi Cap Fund, suitable for investors who are seeking Investment in equity and equity related instruments across sectors and market capitalization level and Long-term capital.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
Disclaimer: The term ‘Hi-Quality and Hi- Growth Portfolios’ refer to Motilal Oswal AMC’s defined fund management processes based on internal qualitative and quantitative research parameters & not be construed as investment advice to any party. The above statements reflect our investment philosophy and should not be construed as indicative of future performance.
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