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UTI Equity Fund   Invest Online

UTI Equity is a large cap-oriented fund with assets under management worth Rs. 2,269 crore (as on June 30, 2013). The fund was originally launched in May 1992 as UTI Mastergain and is benchmarked against S&P BSE 100. A couple of years back the name of the fund was changed to UTI Equity Fund and many of the smaller funds of UTI were merged into this fund.

Performance

The fund has outperformed its benchmark as well as the equity diversified category average in the last one-, three- and five-year periods. It has repeated the same in 2013 (as on May 31). Since its inception the fund has delivered an impressive 26 per cent compounded annual growth rate which is superior to its benchmark performance in the same period.

			YEAR-TO-DATE		1 YEAR		3 YEARS		5 YEARS		SINCE INCEPTION
UTI Equity Fund		-2.71		11.00		6.57		12.67		25.68
S&P BSE 100		-2.90		9.91		1.95		7.32		11.97
Category Average		-7.19		7.39		1.62		8.64
Rank		31/146		45/144		12/129		18/118

Figures in % as on June 30, 2013; Returns above 1-year in CAGR (Compounded Annual Growth Rate) terms

The fund has beaten its benchmark in each of the last calendar five years. In 2009 and 2012 – both of which years witnessed a rally - it underperformed vis-à-vis the equity diversified category average. The fund’s defensive strategy helped it outperform during falling market cycles – like the ones we saw in 2008 and 2011.

			2008		2009		2010		2011		2012
UTI Equity Fund		-45.81		82.85		20.44		-19.09		32.21
S&P BSE 100		-55.49		80.30		15.66		-25.73		29.96
Category Average		-55.82		83.55		19.37		-24.23		34.14
Rank		8/110		65/123		52/131		21/139		72/143

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.

			Standard Deviation		Beta
UTI Equity Fund		0.8858		0.7955
Category Median		0.9319		0.8144

Risk-adjusted Returns. In terms of measures of risk such as Treynor ratio and Sharpe ratio (measured over last three years) the fund has delivered higher return for risks undertaken in the portfolio vis-à-vis its category median.

			Treynor Ratio		Sharpe Ratio
UTI Equity Fund		0.0302		0.0341
Category Median		0.0074		0.0129

Processes

UTI Equity is a large-cap oriented equity fund. The fund is mandated to allocate a minimum 80 per cent of its assets to equity and equity related instruments. According to the scheme information document the portfolio will primarily comprise of leading stocks in respective sectors. The fund manager can invest in large cap as well as mid caps, with large caps forming around 65% of the portfolio.

The investment processes at UTI gives autonomy to the fund manager to execute his investment strategy within the broad internal and regulatory guidelines.

The fund’s expense ratio is 2.06 per cent which is marginally lower than the category median of 2.54 per cent. Like most equity diversified funds the fund has an exit load of 1 per cent on or before one year from the date of investment.

Portfolio

The fund portfolio comprises 73 stocks which is much higher than the equity diversified category median of 41 stocks. In the last five years also it has held more than 70 stocks on an average.

In the last five years the fund has had an average large cap exposure of 78 per cent. During this period the average mid cap exposure has been 12 per cent and exposure to small caps has been negligible. Its average exposure to cash has been 3 per cent. As on May 2013, the fund’s allocation to large caps and mid caps stands at 90 per cent and 7 per cent respectively.

As on May 31, 2013 the fund’s exposure to its top five sectors is 56 per cent compared to the category median of 51 per cent. These sectors are banks, computers – software, pharmaceuticals, cement and refineries. Among banks, the fund has a higher exposure to private banks.

Of the 73 stocks in its portfolio, the fund held 64 in all of the last 12 months. The top five companies held by the fund form 25 per cent of the portfolio compared to the category median of 29 per cent. These companies are ITC, Reliance Industries, HDFC Bank, ICICI Bank and TCS. ITC has been the largest holding in the last 12 months followed by ICICI Bank. While the fund holds a diversified portfolio of almost 70 stocks, it is has a comparatively higher concentration of companies at the top. There are a some good mid cap stocks also in the portfolio, but most have them an exposure of less than 1% of the fund size. So it may be difficult for the performance of any single mid cap stock to make a significant difference to the fund performance.

Over the last one year the fund’s exposure to cyclical stocks has ranged from 59 to 64 per cent, followed by defensives ranging from 21 to 23 per cent and Services between 10 and 14 per cent. The decision to hold some of the more attractive picks in the defensive sectors has paid off in the last year. The fund manager also has kept a high exposure to private sector banks which have done well. Going forward if the market favour returns to the cyclical sectors, the fund may underperform the category, but may still manage to outperform the benchmark.

Fund Manager

Since February 2009 the fund has been managed by Anoop Bhaskar. He is also the Head of Equity at UTI Asset Management Company since April 2007. He has a sound track record and over 20 years of experience in research and portfolio management. Other funds managed by him are UTI Opportunities Fund, UTI Mid Cap Fund, UTI Master Value Fund, UTI Energy Fund and UTI Transportation and Logistics Fund. All five funds have beaten their category averages in the last three years (as on May 31, 2013). Bhaskar has proved his skills as a fund manager by making some timely stock picks, the popular ones being ITC, Crisil and Sun Pharma. He refrains from making highly concentrated bets even on better performing stocks. One may find short-term underperformance during some market cycles but over longer time periods his funds tend to find their place in the top quartile.

View

UTI Equity can be a good choice for investors who want a fund with a large cap bias to invest for the long term into Indian equities. We like the fund’s consistency and risk-reward ratio. The fund’s performance can be attributed to the fund manager’s skills. Hence one needs to be cautious about changes at the helm.

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