For the conservative investor
You may be quite familiar with UTI Opportunities and UTI Dividend Yield, the popular funds from the UTI stable. But UTI Equity may not strike a chord. This fund is not a topper in the performance chart, but has consistently maintained its position in the top quartile of the performance chart of equity funds.
Earlier known as UTI Mastergain, the fund beat peers such as HDFC Equity, DSPBR Equity and ICICI Pru Top 100 over the last three years. It also outperformed its benchmark by a good 6 percentage points over this period (see chart for returns).
If you are a conservative investor looking for limited volatility, content with a predominant basket of large-cap stocks and have moderate return expectations, then UTI Equity may fit your bill. The fund contained declines well both in 2008 and 2011 suggesting that it is a good option to hold in down markets. But you may not witness equally good performance in rallies. While it comfortably beat its benchmark as well as the equity category average by 3-8 percentage points in the 2007, 2009 and 2010 rallies, funds such as HDFC Equity did a better job in delivering returns in swift market run-ups.
Invest in the fund, if you already hold top schemes such as ICICI Pru Bluechip and Quantum Long Term Equity. Hold with a minimum five-year horizon and use the SIP route. Investments through SIPs in the past five years delivered an internal rate of return of 14.3 per cent, twice as much as the returns through lump sum investment; as a result of opportunity to average in 2008.
UTI Equity’s consistency is demonstrated in its rolling returns. We calculated the fund’s one year returns on a daily basis and compared the same with the fund’s benchmark returns. Over a three-year period, UTI Equity’s rolling returns beat its benchmark a good 87-percent of the times. This suggests that your chance of outperforming the benchmark is very high, irrespective of when you enter the fund. A similar record for HDFC Equity, with its own benchmark CNX 500, stood at 79 per cent.
UTI Equity’s returns too, does not deviate much from its average (measured by standard deviation) compared with peer funds including the likes of DSPBR Equity and Fidelity Equity. But as mentioned earlier, that also means that the fund will not swing too far from its average in case of market rallies. Therefore, expect consistency, not chart topping returns from this fund.
UTI Equity has a diversified portfolio of about 70 stocks. But with well over four fifth of its assets in large-cap stocks with market capitalisation of over Rs 10,000 crore, its portfolio is not particularly exciting.
Yet, the fund took tactical calls in sectors over the past year and also held a few niche picks in the small-cap segment. Like most funds, it increased exposure to the financial sector in the last one year. But even as peers pruned their consumer goods holding, the fund increased it. Top stock in this space, ITC, delivered well for the fund.Compared with its benchmark, the fund had higher exposure to stocks such as Cairn India, Bosch and Nestle and afforded lower weights to stocks of Tata Motors, HDFC and Reliance Industries. Some of the smaller stocks in the portfolio include WABCO, Divis Laboratories and Tube Investments of India.
The fund is managed by Anoop Bhaskar.
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