Now, Motilal Oswal Asset stops flows into a PMS product

MUMBAI: A popular portfolio management scheme by Motilal Oswal Asset Management has decided to stop taking fresh money from investors amid waning investment opportunities in mid-and small-cap stocks.With this freeze in new inflows, Motilal Oswal has joined mutual funds including Mirae Asset, DSP Blackrock and SBI Mutual, who had placed various restrictions on fresh investments last year.

Motilal Oswal Asset has decided not to accept more inflows in its product: Next Trillion Dollar Opportunity (NDTOP) under its PMS business, which caters to its more affluent clients. NDTOP invests in small and midcap stocks and has a concentrated portfolio of not more than 20-25 stocks.

The top 5 holdings in the PMS scheme are HPCL, Bajaj Finance, Page Industries, Eicher Motors and Bosch.

“As the size of the fund increases, it becomes difficult to buy a large quantity of a mid-cap stock. Hence, to protect existing investors we need to put a cap on the fund size,“ says Aashish Somaiyaa, MD, Motilal Oswal AMC.

As per a communication sent to distributors, the fund said it will not accept any new inflows in the NTDOP PMS post January 31. Motilal Oswal PMS is one of the largest domestic portfolio manager with assets of Rs 7,700 crore, of which Rs 4,000 crore is managed under NDTOP.

Valuations of midcaps have soared in the last three years. The PE ratio of the Nifty Midcap 50 has risen from 12.5 to 34.2 in the period.The Midcap Fund Universe has given annualised returns of 25.4% in the same period, according to Value Research. But, as stock prices rose, fund managers are left with fewer options to pick the next set of winners.

PMS products are usually sold to rich clients with the minimum investment amount of Rs 25 lakh. Many HNIs prefer to invest in equities through the PMS route, as the fund manager has the flexibility to build a concentrated portfolio of midand small-cap stocks.

Equity PMS schemes have seen sharp growth over the last one year, with the number of investors in such schemes growing 24% from 51,000 to 63,311. In the same period, assets under management grew 33% from Rs 47,000 crore to Rs 62,563 crore.

As valuations in the midand small-cap space soar, many MF schemes have put a cap on accepting fresh inflows. In October, Mirae Asset Emerging Bluechip Fund restricted lumpsum inflows and put a cap on systematic investment plans (SIPs) at Rs 25,000 per year.

DSP Blackrock Microcap Fund restricted lumpsum investments at Rs 1 lakh only in August, while SBI Small and Midcap Fund discontinued taking both lumpsum and SIP investments from investors.