Motilal Oswal Multi Factor Passive FOF: Navigate market cycles with multi factor strategy

Motilal Oswal Mutual Fund has launched a New Fund Offer (NFO), Motilal Oswal Multi Factor Passive FOF. This a fund of funds, which will invest in smart beta or factor ETFs or index funds. Factor investing is popular globally and is increasingly becoming popular in India – there are more than fifty smart beta or factor index funds. Motilal Oswal Multi Factor Passive FOF, will have exposure to four factors, namely, Momentum, Value, Quality and Low Volatility. The fund will have equal exposures to the four factors. The NFO has opened for subscription of 20^th February 2026 and will close on 6^th March 2026. In this article, we will review Motilal Oswal Multi Factor Passive FOF NFO.

What is factor investing?

Factors are the key drivers that determine a stock's long-term returns and risk characteristics e.g., momentum, value, quality etc. Factor investing sits at the intersection of passive and active investment strategies. Passive investments have the benefits of lower cost, no unsystematic or fund manager risk, rule based framework and transparency. Active investments, on the other hand, have the potential to outperform the market (generate alphas), but comes at a higher cost and fund manager risk. Factor or smart beta investing combines the best of both worlds.

Characteristics of distinct factors

Why invest in factors?

• Factors have outperformed the broad market over long investment tenures. The chart below shows the 5 year rolling returns of the 4 factor indices, Nifty 200 Quality 30 TRI, Nifty 500 Momentum 50 TRI, Nifty 500 Value 50 TRI, Nifty 500 Low Volatility 50 TRI versus the broad market index Nifty 200 TRI over the last 20 years. You can see that the factor indices outperformed the broad market across different market conditions.
  
  

  

  Source: Advisorkhoj Research. Period: 1.1.2006 to 19.02.2026

  
  

  The table shows the median rolling returns and percentage of instances when the indices gave more than 12% CAGR returns for different investment tenures over the last 20 years. You can see that the median returns of the factors were higher than the broad market index. You can also see that instances of 12%+ CAGR returns was significantly higher for the factors compared to the broad market index.

  

  Source: Advisorkhoj Research. Period: 1.1.2006 to 19.02.2026



• Relatively lower correlation between factors and market returns: The chart below shows the calendar years returns of the broad market index, the best performing factor in that particular year and the worst performing factor. You can see that there is considerable divergence in returns between factors and the broad market. Getting exposure to multiple factors in your portfolio will provide greater diversification benefits.
  
  

  

  Source: Advisorkhoj Research, as on 19.02.2026



• High active share: Factors portfolio have very high active share in terms of stocks and sectors (see the chart below), signifies that they are not benchmark hugging strategies.
  
  

  

  Source: Motilal Oswal MF, NSE, BSE, as on 31.01.2026

Why equal weight multi-factor strategy?

The chart below shows the calendar year returns of distinct factors viz, Quality, Low Volatility, Value and Momentum. You can see that winners rotate across factors, making market timing difficult. It is difficult to predict which factor will outperform in the near term. A diversified factor mix may help improve risk adjusted outcomes versus attempting to time rotations.

Source: Advisorkhoj Research, as on 19.02.2026

Signals that look strong in back testing of Factor Rotation strategy often exhibit weakness in live markets. Moreover, moving between factors several times a year adds trading costs and increases taxable events.

Motilal Oswal Multi Factor Passive FOF

Equal weight Multi factor fund has the potential to outperform most factors

The chart below shows the rolling returns of equal weight multi-factor versus the individual factors for different investment over last 20 years. You can see that multi-factor fund outperformed most of the factors across different investment tenures.

Source: Motilal Oswal MF, NSE, BSE. Period: 16.09.2025 to 31.01.2026. Value = BSE Enhanced Value TRI, Quality = BSE Quality TRI, Low Vol = BSE Low Volatility TRI, Momentum = Nifty 500 Momentum 50 TR. Multi Factor equal weight allocates 25% to each factor

While multi-factor fund outperformed most of the factors across different investment tenures, it did so with relatively lesser volatility (see the chart below).

Source: Motilal Oswal MF, NSE, BSE. Period: 16.09.2025 to 31.01.2026. Value = BSE Enhanced Value TRI, Quality = BSE Quality TRI, Low Vol = BSE Low Volatility TRI, Momentum = Nifty 500 Momentum 50 TR. Multi Factor equal weight allocates 25% to each factor

Equal weight Multi factor fund outperformed the broad market index (historical data)

Source: Motilal Oswal MF, NSE, BSE. Period: 16.09.2025 to 31.01.2026. Value = BSE Enhanced Value TRI, Quality = BSE Quality TRI, Low Vol = BSE Low Volatility TRI, Momentum = Nifty 500 Momentum 50 TR. Multi Factor equal weight allocates 25% to each factor

Why invest in Motilal Oswal Multi Factor Passive FOF?

Who may find Motilal Oswal Multi Factor Passive FOF?

• Investors seeking capital appreciation over long investment horizon


• Investors who prefer passive factor (smart beta) investing


• Investors who want to get exposure to multiple factors in a single fund


• Investors with minimum 5 year investment tenures


• Investors with very high risk appetite


• Investors who want to invest through SIP

Investors should consult with their financial advisors or mutual fund distributors if Motilal Oswal Multi Factor Passive FOF is suitable for their investment needs.