Well diversified, superior returns

UTI Equity Fund, launched in April 1992, is a diversified equity fund with average assets under management (AUM) of Rs 1,953 crore as of quarter ended September 2011. The fund has a mandate to invest at least 80 per cent of in equity and equity-related instruments and up to 20 per cent in debt and money market instruments.

The fund is ranked CRISIL Fund Rank 1 (top 10 percentile of the peer set) in the Diversified Equity Funds category as per the Crisil Mutual Fund Ranking for the quarter ended June 2011. The fund has been ranked in the top 30 percentile of the peer group for 10 out of the past 13 quarters (exceptions were March, June, September 2010). The consistency in fund performance indicates a blend of superior performance and efficient portfolio management. It is managed by Anoop Bhaskar, who is the Head of Equity at UTI Asset Management Company (AMC).

PERFORMANCE
The fund has delivered superior returns and outperformed its benchmark (BSE 100) and category average over longer time frames of 3 and 5 years. Over the last 1 year, too, the fund has given considerably lower negative returns (-11 per cent) as compared to its benchmark (-19 per cent) and category average (-17 per cent) indicating that the fund managed to limit its downside better vis-à-vis its category. Likewise, it has done better (-16.6 per cent) during the six months period ending September 30, 2011 as compared to the category average (-20.3 per cent) and BSE 100 index (-28 per cent). Over a 5 years period, the fund posted a compounded annualised growth rate (CAGR) of over 10 per cent vis-à-vis 6 per cent and 8 per cent, respectively of the BSE 100 and the category.

An investment of Rs 1,000 over a 10-year period since August 2001 would have appreciated to Rs 7,669 (CAGR of 22.19 per cent) as on September 30, 2011. The same amount invested in the benchmark and S&P CNX Nifty would have returned Rs 5,531 (CAGR of 18.32 per cent) and Rs 4,649 (CAGR of 16.32 per cent), respectively. In a monthly systematic investment plan (SIP) of Rs 1,000 for 10 years, the total invested amount of Rs 1,20,000 would have grown to Rs 3,33,297 as on 30th September, 2011 yielding an annualised return of close to 20 per cent. A similar monthly SIP in the BSE 100 would have grown to Rs 2,76,601 yielding over 16 per cent annualised returns.

LARGE CAP BIAS
The fund has diversified its holdings across market capitalisations but has shown bias towards large cap stocks. The fund’s exposure in CRISIL defined large cap stocks (top 100 stocks based on 6-month daily average market capitalisation on the National Stock Exchange) has never been less than 60 per cent over the past 2 years. As of August 2011, 69 per cent of the fund had exposure to large cap stocks followed by 30 per cent to midcap stocks and a less than 1 per cent exposure to small cap stocks.

INVESTMENT STYLE
Active cash calls during various market phases, is an important characteristic of UTI Equity fund’s investment style. This strategy benefited the fund when markets were going through a bear phase. Between June 2008 and May 2009, the fund’s average equity exposure stood at 79 per cent as compared to its category average of 86 per cent. The fund manager increased average exposure to cash and cash equivalents to approximately 13 per cent during this period. When the markets started recovering post May 2009, the fund manager increased average equity exposure to 92 per cent and reduced exposure to cash & cash equivalents to 6 per cent for the same time period.

PORTFOLIO DIVERSIFICATION
The fund held an average of 73 stocks over a period of 3 years indicating a well diversified portfolio. The top 5 stocks of the fund has accounted for only 17 per cent of the portfolio over the last three years.

As on August 2011, the top 5 stocks overweight vis-à-vis its benchmark are TCS, Sun Pharmaceutical, Nestle India, Axis Bank and Cairn India and underweight stocks are Reliance Industries, Infosys, Larsen & Toubro, Mahindra & Mahindra and Tata Steel. At the industry level, banking has been the most favoured sector over the last three years, with an average 16 per cent exposure followed by consumer non durables and software constituting 13 per cent and 8 per cent, respectively.

For the last three years, the fund has increased exposure to software and pharmaceuticals which have outperformed the benchmark (BSE 100) for the same period.

— Crisil Fund Services