The Hindu Business Line : UTI Infrastructure: Hold

Though UTI Infrastructure led the pack of theme funds over the last six months, investors must be aware of the higher risks of such funds and allot them only a small part of their portfolio to perk up returns.

Investors can retain their units in UTI Infrastructure. The fund's one-year return of 45 per cent is comparable to other funds with similar themes such as DSPML T.I.G.E.R.

In May 2006, UTI Mutual changed the name of this fund from UTI Basic Industries to UTI Infrastructure.

As the other features remain unchanged, the fund retains the option to invest in a larger universe of stocks compared to other "infrastructure" funds.UTI Infrastructure's inspiring performance has led to its moving up to the top ten performers among diversified funds over the past six months. It has also led the pack of sector/theme funds over the above period.

Theme funds, however, carry higher risks than diversified funds. Investments in such funds, therefore, must form only a small part of the portfolio to perk up returns.

Sector funds also require timely entry and exits and are best-suited to investors who subscribe to a theme and actively track it.

Performance: With an annual return of 57 per cent over the past two years, UTI Infrastructure has outpaced such peers as Birla Sun Life Basic Industries and DSPML <243>T.I.G.E.R.

This performance is also superior to the BSE Capital Goods index (BSE CG), which returned 26 per cent annually over the above period.

On a monthly return basis, the fund also outpaced its benchmark BSE-100 in eight of the last 12 months. Like most other sector funds, UTI Infrastructure did take a hit since May as a number of engineering and construction stocks declined.

UTI Infrastructure has exposure to sectors such as engineering, construction, metals, consumer goods and energy and is more diversified than pure sector funds such as Reliance Diversified Power.

The fund also appears to reduce its risk profile by gradually moving to large-cap stocks to suit market conditions.

As of June 2006, about 77 per cent of assets were invested in stocks with a market capitalisation of over Rs 2,000 crore as against 61 per cent a year earlier. The fund has timed its move to capitalise on the large-cap rally.

UTI Infrastructure has adopted a `hold' approach in a number of stocks.

Such a wait may be warranted in sectors such as capital goods, where conversion of order book to revenue may require 12-18 months.

The strategy is also reflected in its relatively low portfolio turnover of 32 per cent.

Bharat Heavy Electricals, Thermax and Voltas are some of the stocks that made an early entry and have stayed with the fund through various phases of the capital goods rally.

Portfolio overview: Industrial manufacturing and construction continue to enjoy the maximum allocation.

In the construction space, the fund has extended its portfolio to realty, with an exposure to D.S. Kulkarni Developers.

While consumer goods may not strictly fall within its primary objective, UTI Infrastructure has for long held on to stocks in the consumer goods space.

The top ten stocks accounted for 43 per cent of the total assets with exposure to individual stocks restricted to 6 per cent.

The fund size has grown by 53 per cent to Rs 395 crore between January and June 2006.

Fund facts: UTI Infrastructure was launched in March 2004 and is managed by Mr Sanjay Dongre. The NAV per unit is Rs.21.7.

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