Stable performer that rides out volatility

The fund has been able to contain downside risks better in choppy markets

Investors with a low risk appetite can consider buying the units of UTI Equity, a multi-cap fund with a long-term track record. The fund’s performance has notably improved over the past year, after a muted show in 2015 and 2016.

Though the fund delivered a good return of 30 per cent in 2017, it underperformed the category average. That said, it has made a strong comeback this year, delivering 1.3 per cent return year-to-date, while the category average is a negative return of 8.6 per cent.

Also, while the fund may not have delivered chart-topping returns in the past, its performance has been less volatile.

In particular, it has been able to contain the downside risk better (2008 and 2011), as is evident from assessing the fund’s Sortino ratio — which measures the performance of a scheme during downtrends.

Hence, given the current volatility in the market, the fund is a good option for risk-averse investors. It has delivered steady returns of 14.2 and 16.7 per cent over seven- and 10-year time-frames, respectively, beating the benchmark returns of 12 per cent and 13.5 per cent.

Investors can choose the systematic investment plan (SIP) route to ride out the market volatility better.

Following SEBI’s categorisation and rationalisation of mutual funds, UTI Equity moved from the large- to the multi-cap category. But since the fund more or less followed a multi-cap approach (60 per cent in large-caps and rest in mid- and small-caps), there has not been a drastic change post-re-categorisation. The benchmark, though, changed from S&P BSE 100 to S&P BSE 200. UTI Bluechip Flexicap (a multi-cap fund) was also merged into UTI Equity in May 2018.

Strategy

The underperformance of the fund in 2015 and 2016 could be attributed to the lacklustre performance of the software sector, which is one of the fund’s top-preferred sectors.

However, its penchant for the sector paid off in the latter part of 2017 and in 2018, as software stocks came back in favour. This has boosted the fund’s NAV.

UTI Equity has outpaced its benchmark as well as category average by a good margin over the past year. The turnaround in the performance has pushed the fund to the top of the category.

It has beaten peers such as Reliance Multi Cap, Mirae Asset India Equity and Principal Multi Cap Growth.

UTI Equity almost fully invests in equities, and holds about 58 per cent in large-caps, 32 per cent in mid-caps and the balance in small-caps.

The top four sectors — banks, software, pharma and finance — form the majority (about 58 per cent) of the portfolio. Within the banking space, the fund holds private sector banking stocks that continue to do well, such as HDFC Bank, IndusInd Bank and Kotak Mahindra Bank.

Portfolio

While marginally trimming its allocation to the banking space over the past one year, the fund had increased its exposure to the software and industrial products sectors.

It has also gradually reduced exposure to automobiles. Healthcare services and construction sectors got added to the portfolio almost a year ago.

Barring the top 4-5 stocks, the fund takes a diffused approach and allocates less than 4 per cent to individual stocks. UTI Equity holds about 58 stocks.

It is underweight in financial, automobile and FMCG, whereas overweight in healthcare, software, services and chemicals. Bajaj Finance, HDFC Bank, IndusInd Bank, Infosys and TCS are the top holdings.

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