THE key to optimise returns on any investment is to diversify the risk of the portfolio across various asset classes. And this is precisely UTI Wealth Builder Series II has focused on since its launch towards the end of the financial crisis in November 2008. It has learnt the lessons the hard way. It has seen the sharp decline of equity assets due to the global uncertainties and gold gaining the momentum. As a result, UTI launched the scheme that aimed to get the best of both these asset classes — equity and gold.
Two years down the line, this notion of combining the two asset classes seems to have finally paid off. UTI Wealth Builder Series II, which took off with just about 100 crore of assets has grown six times in size over the past two years. The fund currently has assets of over 600 crore. And not only has the timing of the fund proved just right for the fund house as it has invested in equities when they were at an all-time low, coupled with its investment in gold has turned out to be an added advantage. The price of the yellow metal has skyrocketed over the past two years. Clearly, early investors of UTI Wealth Builder Series II would be very happy with their returns from this scheme.
Performance:
UTI Wealth Builder Series II is just about a couple of years old and does not have a long performance history. However, even in these two years, the fund has performed fairly well. As the scheme's portfolio comprises equity and gold, its performance can be compared with a suggested model benchmark (as suggested by UTI mutual fund house) — incorporating returns of both these asset classes in the ratio of 65:35 to BSE 100 equity index and prices of gold in India, respectively.
Since its launch in 2008, UTI Wealth Builder Series II has generated about 100% returns till date. The model benchmark index has returned about 91% during this period while the broader Nifty index has delivered about 102% returns so far during this period.
If one were to analyse the yearly performance, 2009 — the year of market recovery — saw the fund generating about 73% returns as compared to 64% returns by the model benchmark and 76% returns by the Nifty.
In the current calendar year, UTI Wealth Builder Series II has returned about 14% gains so far against 16% returns by its model benchmark index and 14% returns by the Nifty.
Portfolio:
With the gold price rising more than 50% over the past couple of years, UTI Wealth Builder Series II has definitely been a beneficiary of this upsurge. The fund has been gradually increasing its exposure in gold ETFs (exchange traded funds) from about 8.5% in early 2010 to nearly 10% by the end of the current calendar year.
Another factor that has worked in favour of this fund is the timing of its launch in November 2008 when most blue-chip stocks were available at very low prices. One can find scrips like ICICI Bank, HDFC Bank, SBI, BHEL, GAIL, Cairn India and Titan Industries at extremely lucrative valuations. As the fund has been holding on to these stocks from early 2009 to till date, each of them, having appreciated multifold since then, has boosted its net asset value (NAV) tremendously.
The fund has invested in Nestle India, Petronet LNG and Kotak Mahindra Bank and also has yielded decent returns. In fact, if one were to analyse the notional profit quotient of the fund from its current portfolio, almost 94% of its equity holdings are currently in the green zone. They are quoting a price higher than the price at which these were invested into. As far as the diversification is concerned, its 600 crore portfolio is decently diversified into about 31 equity stocks, gold ETFs and other assets like bank deposits.
Our View:
UTI Wealth Builder Series II has introduced an altogether different concept of investing in the mutual fund industry by diversifying its portfolio, across asset classes. Moreover, the scheme's choice of equity stocks and the returns thereon have also been commendable so far. Investors can definitely consider this scheme as an investment option.
