UTI Equity Fund - INVEST

If you are looking for a conservative large-cap focussed fund, then UTI Equity Fund makes a good investment option.

Formerly known as UTI Mastergain, the fund has made a notable comeback since a change in its fund manager in 2007.

Its returns now compare favourably with both its benchmark and most peers over one-, three- and five-year time frames.

That the fund has done exceedingly well during market declines and periods of high volatility also adds to its charm.

While it hasn't been a top-notch performer during market rallies, that it managed to deliver significantly better than category average and benchmark inspires confidence.

Performance and strategy : Over the last one year, UTI Equity has delivered about 5.1 per cent returns, significantly better than its benchmark BSE 100's 1.8 per cent returns.

Over the year, it also outperformed peers such as Magnum Equity, Fidelity Equity, Tata Pure Equity, Birla Sun Life Front Line Equity and HDFC Top 200.

It's three and five-year returns of about 29 per cent and 11 per cent put it in the top quartile of performance within its category.

It is the fund's performance during corrections and volatility that has helped it score over peers.

In 2008, it arrested its NAV slide to 45 per cent, as against the category average of 52 per cent. Even in the volatile markets of 2010 and 2011 it managed a better show than its peers. Its performance was aided by its stock and sector picks.

The fund maintained its focus on domestic consumption themes such as FMCG, banks and auto, and kept its exposure to infrastructure, capital goods and power stocks low.

That said, for a seasoned fund that’s been in existence since 1992, its 11.7 per cent return since inception doesn't inspire much.

It is here that the new fund manager instils confidence. Not only has the fund seen a drastic improvement in performance since, it's also seen some changes in investment strategies.

It has desisted from making significant cash calls. While it was caught idling with a considerable cash exposure in the early 2009 rally, the fund made quick amends and has since limited its cash exposure.

The fund's portfolio was also diversified to include more number of stocks, including a select few from the mid-cap space as well.

Therefore, the fund's last five years' return may be more representative of future performance. That, unlike in 2009, the fund doesn't have significant cash exposure may also help it ride a rally (if any) from hereon better.

Portfolio : While UTI Equity enjoys a predominant large-cap bias — stocks with a market capitalisation of more than Rs 10,000 crore make up about 80 per cent of its current portfolio — its choice of mid and small-cap stocks has also stood it in good stead.

The fund has limited its holding in these market capitalisation categories to stocks that are established in their businesses.

For instance, mid-cap stocks such as Ashok Leyland, Divi's Laboratories, and Eicher Motors make up its portfolio.

Its exposure to stocks with less than Rs 3,000 crore market capitalisation is limited to less than 5 per cent.

Its portfolio is also fairly diversified, with the top 5 holdings accounting for about 22.6 per cent of its portfolio (top ten make up 39 per cent). It sports 80 stocks in its January-12 portfolio.

Over the last six months, the fund has largely maintained its top exposure to the financials, FMCG, pharma and technology sectors.

More recently, it has increased its allocation to the energy sector, while cutting exposure to the construction sector.

Mr Anoop Bhaskar is the fund manager.

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