• Investment World
• eWorld
• Catalyst
• Mentor
• Life
• Canvas
• Praxis
• Urban Pulse
• Brand Quest

Aarati Krishnan

INVESTORS in US-95, a balanced fund managed by UTI Mutual Fund, can consider booking profits on part of their investments. Profit-booking may help investors lock into the high returns of the past year. It may also be prudent in light of the slip-up in performance in recent times.

After notching up a good performance in 2002, US-95 has significantly under-performed competing funds in its category over the past year. Returns on the fund for a one-year period were around 56 per cent, against the 70-80 per cent recorded by funds such as the HDFC Prudence and the FT India Balanced fund.

The fund has, however, done significantly better than its benchmark — the CRISIL Balanced Fund index. The fund's good track record over the past five years is a confidence-inspiring factor, so investors may retain part of their holdings.

Suitability: With a 60 per cent allocation to equities, US-95 carries a lower risk profile than a pure equity fund. However, due to its dynamic approach, its risk profile is higher than that of funds which maintain a steady asset allocation. The fund actively alters its debt-equity mix, depending on the fund manager's outlook for the equity and bond markets. A wrong call on this front, can significantly impact returns.

Performance: US-95 has maintained a 60:40 mix between equities and debt over the past year, which is similar to most other balanced funds. Though returns over the past year have been much lower than some of its peers, US-95 is one of the few balanced funds with a reasonable five-year track record.

The fund has earned a 27 per cent annualised return over the past five years. Its policy is to pay out a portion of the gains as dividends each year, with dividends dropping from 27 per cent in 2000 to 10 per cent in 2003. The debt portion of the portfolio has a medium maturity profile of 4.7 years, with around 10 per cent in gilts and the balance in corporate bonds.

The equity portion has a relatively high allocation to mid-cap stocks, with auto, pharma and banking stocks being the key exposures.

As with other balanced funds, a strategy of investing directly in a 60:40 combination of an equity and debt fund would have earned an investor a much higher return than was available from US-95. For instance, an investor who put 60 per cent of his portfolio in UTI's Mastergrowth — one of its better performing equity funds — and 40 per cent in UTI Bond Fund, would have generated a 70 per cent return over the past year.

Article E-Mail :: Comment :: Syndication

Stories in this Section
Quiz

Copyright © 2004, The Hindu Business Line. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu Business Line