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UTI Equity Fund: Conservative Large cap fund
Sat, Jan 30, 2016
Source : Jeni Shukla, Citrus Interactive

UTI Equity is an open-end diversified equity large cap fund. It was launched in May 1992 and is one of the oldest mutual funds in India. It is benchmarked against the S&P BSE 100 Index. The fund has an AUM of Rs. 4,721 crore as on December 31, 2015 which has gone up by Rs. 758 crores as compared to a year ago.

 

Performance

UTI Equity has done a great job in terms of beating its benchmark index consistently across time horizons (refer to table below). However, when compared to the equity diversified category the fund has underperformed in all the time periods except the 5-year period. In the last 1 year it has been a third quartile fund.

Scheme Name

6 Months

1 Year

2 Years

5 Years

Since Inception

UTI Equity Fund

-1.67

0.91

21.69

11.23

15.83

S&P BSE 100

-4.33

-3.25

13.13

5.51

11.88

Category Average

0.08

3.63

26.14

11.22

NA

Rank

101/161

104/158

90/149

  55/138

NA

Figures are in % as on December 31, 2015; Returns above 1-year in Compounded Annual Growth Rate (CAGR)

The fund has beaten its benchmark in each of the last five calendar years. It has beaten the equity diversified category average in 2011 and 2013. In all the other years it underperformed the category. It was successful in limiting its fall (relative to its benchmark as well as category average) in the year 2011 which was a bad year for the markets.

Scheme Name

2011

2012

2013

2014

2015

UTI Equity Fund

-19.09

32.15

7.56

46.76

0.91

S&P BSE 100

-25.73

29.96

5.87

32.28

-3.25

Category Average

-23.95

34.05

5.43

53.99

3.63

Rank

21/138

72/142

46/146

84/149

104/158

All figures in %

Risk: In terms of measures of risk such as standard deviation and beta (measured over last three years), the fund has taken lower risk compared to the category median.

 

Standard Deviation

Beta

UTI Equity Fund

0.9

0.88

Category Median

0.95

0.89

Risk-adjusted Returns: In terms Treynor and Sharpe ratio (measured over last three years), the fund has provided almost the same risk-adjusted returns as the category median.

 

Treynor

Sharpe

UTI Equity Fund

0.062

0.071

Category Median

0.06

0.07

 

Portfolio Characteristics

Sector Concentration:  The fund’s concentration in the top 3, 5 and 10 sectors is lower than the category median highlighting lesser risk of the fund.

 

Top 3

Top 5

Top 10

UTI Equity Fund

32.79

46.11

66.41

Category Median

36.43

49.44

70.09

 

Company Concentration: The concentration of funds in top 3, 5 and 10 companies in its portfolio is also lower than the category median highlighting lesser risk of the fund.

 

Top 3

Top 5

Top 10

UTI Equity Fund

17.63

24.88

38.64

Category Median

18.69

27.5

44.45

Lesser Sector & Company Concentration signifies the low risk profile of the fund.

Number of equity holdings: The fund currently holds 81 stocks in its portfolio (December 31, 2015), which is much higher than the median stock count for the diversified-equity category, which currently stands at 46. Thus, based on equity count the fund runs a highly diversified portfolio compared to its peer set. Over the past five years the fund has always had a diversified portfolio with the number of equity holdings over this period averaging 74.

Cash allocation: Its cash allocation at the end of December 2015 was 6.96 per cent. The average cash allocation for last five years is 3.23 per cent. Its maximum allocation to cash over last two years was 7.51 per cent in November 2015 and lowest was 0.41 per cent in October 2014. In 2015 it had an average cash allocation of 4.26 per cent.

Portfolio Insights: The top 5 sectors in the portfolio had an allocation of 46.11% which is lower than the category average of 49.44%. The top 5 sector include Private Banks, IT- Software, Pharmaceuticals & Drugs, Refineries and Cement & Construction.

The fund’s exposure to cyclical stocks is currently 64.92% followed by Defensives with 12.71% and Services with 1.59%. The top five holding are HDFC Bank, Infosys, Reliance Industries, Sun Pharmaceutical Ind and Tata Consultancy Services.

In the last six months the fund has bought NTPC Ltd., Exide Industries, Idea Cellular, HDFC, The Indian Hotels Company, Orient Cement and IDFC Ltd. It has sold its holding in Tata Steel in the last 6 months.

There are 60 stocks with a combined weight of over 78% in the portfolio with a market cap of over Rs 10,000 crs in the. Midcaps with a market cap between Rs 1200 crs and Rs 10,000 crs constitute 14% of the portfolio weight.

 

Process

A miminum of 80% will be invested in equity instruments; upto 20% can be invested in debt and money market instruments. Around 65% of the portfolio would be invested in large cap companies. The portfolio mainly comprises of leading stocks in the respective sectors. The style of management is conservative.

The fund’s expense ratio is 2.35% which is slightly higher than the category average of 2.34%. Like most equity funds the fund has an exit load of 1 per cent on or before one year from the date of investment. Minimum investment in the fund is Rs 5,000.

 

Fund Manager

Recently Mr. Ajay Tyagi has taken over as the fund manager (in January 2016). Mr Ajay Tyagi is a CFA Charterholder from The CFA Institute, USA and also holds a Masters degree in Finance from Delhi University. Ajay joined UTI in the year 2000 and has been working in the equity research and fund management functions since then. He is presently working as a Fund Manager in the Portfolio Management Division, where he is managing funds for private clients like Offshore funds, HNIs, Institutions, Trusts etc. He is also acting as an Investment Advisor to a few India dedicated offshore funds. Prior to being designated as a Fund Manager he has worked as an Assistant Fund Manager in the Offshore Funds division. Mr. Tyagi also manages the UTI Bluechip Flexicap Fund (since December 2015).

The fund was earlier managed by Anoop Bhaskar.

 

View

Though the investment mandate allows the UTI Equity Fund to be managed as multi cap fund, the AMC has chosen to position it as large cap oriented fund. A look at the portfolio makes it amply clear that it is a conservatively managed large cap oriented fund with 78% allocation to large caps against a minimum requirement of 65%. However, to its credit the fund has managed to outperform its benchmark in each of the last 5 calendar years. This fund is suitable for those investors who are not looking for any superlative performance but will be happy with a return (after deductions of costs) that is superior to the S&P BSE 100 index. There has been a change at the helm very recently. The fund manager should maintain the large cap nature of the fund. And continue to outperform the benchmark over all periods. He should also try to reduce the number of holdings and the level of cash balance. We will keep a close watch.

 

To read the previous Citrus Analysis of UTI Equity Click Here.

 
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