UTI Infrastructure sticks to the theme strictly and avoid making a buy in an unrelated sector
The initiator of the theme had a great start. While it is still one of the better options in the category, it has slowed down considerably in terms of its return momentum. A fundamental reason could be simply because the fund manager has stayed fiercely loyal to the theme.
Unlike his peers, he has not taken advantage of the loosely defined nature of this theme. In fact, this fund is as close as you can get to a pure infrastructure play. Only two financial stocks have made an appearance in this portfolio, IDFC (infrastructure financing) and Srei Infrastructure Finance. No stocks from Auto (barring Ceat), Banking, Healthcare, Techonology and Media & Entertainment have appeared in this portfolio. Dongre claims to never have "fallen for the temptation of making a buy in an unrelated sector and then attempting to justify that stand or broadening the objective to include it."
In 2006, this fund was the best performer in the entire universe of equity funds. Come 2007 and it could not match up to the returns of its peers. The fund manager's restraint was obvious. Though the market was on a roll, he played it safe and raised large-cap exposure gradually over the year. "As fund managers we all have boundaries which are laid down to manage a fund. We have always held that in this fund we would maintain a large-cap exposure of around 60 per cent to maintain stability, and by and large, we stick by it," says Dongre. Simultaneously, allocation to Construction dropped, despite this sector rallying while Metals hovered below the category average.
In 2009, his cash call got extended for way too long. In the first quarter of 2009, the equity allocation (around 61%) was way below the category average. This move paid off and resulted in the fund shedding a mere 0.93 per cent that quarter (category average: -3.16%). Once the market began to rally Dongre was not convinced and was slow in upping his equity exposure. As a result the returns he delivered last year put him at the bottom spot amongst his other infrastructure peers.
Though Dongre adheres to a buy-and-hold strategy, he makes it clear that "Infrastructure is not about value picks. Because it is a growth story we buy stocks with a time horizon of 2-3 years."
Individual stock holdings have never crossed 7 per cent (barring RIL) while the number of stocks hovers at around 50.
