Fund Pick: UTI Equity Fund

Long history of outperformance

Launched in 1992, UTI Equity Fund is one of the oldest funds in the mutual fund sector. It is classified in the large cap-oriented equity category of the CRISIL Mutual Fund Ranking for the quarter ended June and is ranked CRISIL Fund Rank 1. It has been ranked in the top 30 percentile (either Fund rank 1 or 2) of the peer group for the past 15 quarters. Managed by Anoop Bhaskar, the fund reported average assets under management (AUM) of Rs 2,904 crore for the quarter ended June.

Investment philosophy
UTI Equity Fund aims to generate capital appreciation by investing in a diversified portfolio across market capitalisation, with large-caps comprising about 65 per cent of the portfolio. Over the past three years ended June, the fund was close to fully invested with an average 95 per cent exposure to equity and the remaining in cash equivalents. During this period, the fund had bias towards large-cap stocks with an average exposure of 87 per cent in CRISIL defined large-cap stocks (top 100 stocks based on a nine-month daily average market capitalisation on the National Stock Exchange), with the rest in small and mid-cap stocks.

The fund has outperformed its benchmark (S&P BSE 100) across all timeframes, including by way of systematic investment plans of Rs 1,000 a month. Barring marginal underperformance during 15-year period versus the large-cap category by CRISIL Mutual Fund Ranking, the fund has been an outperformer. Further, lower volatility (measured by standard deviation) of 17.19 per cent compared with the benchmark (20.55 per cent) and category (18.85 per cent) over a three-year period ended August 1 showcases the fund's risk adjusted performance.

During the sub-prime crisis (January 2008-March 2009), UTI Equity Fund fell 38 per cent versus S&P BSE 100's 47.9 per cent fall. When the markets recovered, from April 2009 to December 2010, the fund gained 57.4 per cent against S&P BSE 100's 55 per cent. In terms of year-to-date, the fund gained 26.3 per cent compared with S&P BSE 100's 21.5 per cent.

Portfolio strategy
Over the past three years ended June, banks have been the most favoured sector in this fund's portfolio, contributing 20 per cent to the total, followed by software and consumer non-durables contributing 12 per cent and 10 per cent, respectively. The fund's overweight stance on pharmaceuticals, consumer non-durables and cement sectors contributed.

At a stock level, the fund had a diversified portfolio, with an average of 71 holdings compared with the category's 43. The top 10 stocks accounted for 41 per cent against 49 per cent of the category. Over a three-year period ended June, 55 per cent of the holdings outperformed the benchmark, S&P BSE 100.

Exposure to consistent holdings over the same period such as Sun Pharmaceuticals, TCS, Shree Cement, ITC and Eicher Motors helped the fund generate higher returns.

CRISIL Research