Uti To Use Derivatives As Petro Fund Hedge

Unit Trust of India (UTI) will be using derivatives as a hedge for its investments in its Petro Fund, which is dedicated to investments in stocks of the petro sector. Further, the fund manager is also planning to move away from view-based investing to trading-based investment for the scheme.

Sanjay Sinha, fund manager of the scheme said that, internally they had already discussed the use of derivatives as a hedge in the scheme and would be soon putting it to use. "We will be churning around 15-20 per cent of our portfolio aggressively," he said, with reference to the change in the investment pattern of the scheme.

 

The Petro Fund has benefited enormously from the disinvestment of IBP Ltd, in which it had a substantial stakeholding. The scheme had acquired the shares at fairly low prices, especially post-September 11 last year, when stock prices had eroded sharply. Around two per cent of the holdings in the scheme were accepted in the open offer which was at Rs 1,550 per share. As on May-end 2002, IBP had a weightage of more than 14 per cent in the portfolio of the scheme.

Meanwhile, with respect to its index fund -- Master Index Fund -- which tracks the Sensex, Sinha said they were cutting costs by reducing the expense ratio of the scheme. This will be done by rationalising the commission structure wherein incentives are provided to investors and by reducing their publicity expenses.

Both its index funds have witnessed good inflows in recent months, Sinha said, adding that there was substantial interest from institutions and high net-worth individuals.