NFO review: Motilal Oswal Nasdaq Q 50 ETF

Motilal Oswal Mutual Fund has rolled out an Exchange Traded Fund (ETF) that will be tracking the Nasdaq Q-50 index. The fund house has pioneered tracking this index in the international category of mutual funds. And interestingly, it had done the same with Nasdaq 100 by launching Motilal Oswal Nasdaq 100 ETF way back in 2011. Many more funds tracking Nasdaq 100 have emerged, a lot of which were launched over the past few months.

About the index
Nasdaq Q-50 index tracks the performance of the 50 largest non-financial companies, excluding the first 100 on the Nasdaq stock exchange. So as we know, Nasdaq 100 tracks the performance of the 100 largest non-financial companies listed on the exchange. The Nasdaq Q 50 would track the performance of the next 50 non-financial companies, that is, from 101 to 150, based on their market capitalisation.

Like Nasdaq 100, the Q-50 index is also tilted towards the 'Information Technology' with an exposure of 46 per cent, which is slightly less against Nasdaq 100's exposure of 51 per cent. Both indices share 'Consumer Discretionary' as their second-largest sector and have a somewhat similar allocation of about 18-20 per cent. However, things vary when it comes to the third-largest sector for both indices. While Nasdaq Q 50 positions 'Healthcare' as the third sector with an allocation of 16.1 per cent, Nasdaq 100 allocates only 5.8 per cent to the sector. It instead positions 'Communication Services' as the third largest sector with an allocation of 17.4 per cent. Here is the detailed sector break-up of the indices and their top 10 constituents.

Performance
Nasdaq Q 50 has been continuously underperforming Nasdaq 100 over any five years since the last quarter of 2017. Its performance wasn't too impressive even before. The average five-year return of Nasdaq Q 50 over the previous seven years was 20.30 per cent as against 22.98 per cent generated by the Nasdaq 100.

About the fund house
The fund house manages little more than Rs 35,400 crore of investors' money, which amounts to less than 1 per cent of the industry's total assets under management (AUM). Its equity franchise is spread across 17 open-end funds, collectively managing Rs 32,680 crore.

Besides the one being launched now, the fund house has four more international funds in its product basket, of which Motilal Oswal MSCI EAFE Top100 Select Index Fund was launched just a few days back. Among the other three, one tracks the Nasdaq 100 while the other tracks S&P 500. The third one is a fund of funds, which invests in the fund house's Nasdaq 100 ETF. These three international funds collectively manage close to Rs 13,000 crore, almost 40 per cent of the fund house's equity franchise.

Here is a peek at how successfully both the international funds have been able to track their benchmark, followed by a split of the open-end equity funds based on Value Research's star rating.

Also read: Three questions you should ask before investing in an NFO