With its compact portfolio of large-caps, the fund is suitable for less aggressive investors, but may not be the right choice for investors seeking exposures to mid- and small-cap companies.
Investors can hold their units in UTI Leadership Equity Fund. With a return of 27 per cent since its launch in February 2006, it is not too far behind established large-cap funds in terms of one-year performance. The performance also appears to have gathered pace over the past six months as is evident from the improving returns. Investors however, need to watch its performance over a longer time-frame before taking fresh exposure, as the fund is only about a year old now and is yet to prove itself over a complete market cycle.
UTI Leadership is an open-ended equity fund that aims at investing at least 65 per cent of its assets in stocks that are `leaders' in their respective sectors and up to 35 per cent in companies that are "potential" leaders.
Suitability: As the fund's aim is to predominantly invest in leaders (in terms of market capitalisation or sales or market share), it has a compact portfolio laden with large-cap stocks. To this extent, it is suitable for less aggressive investors. It may not be suitable for investors seeking a significant exposure to mid- and small-cap companies, as emerging leaders do not, as yet, find any significant allocation in the portfolio.
Performance: The fund's performance since inception lags its benchmark S&P CNX Nifty's return of 35 per cent. However, a number of large-cap funds including HDFC 200 have lagged the S&P CNX Nifty in this period, as the rally in the index was restricted to a limited number of stocks.
In the recovery phase since June 2006, the fund has outpaced its benchmark as well as a number of peers. Between July 2006 and mid-February 2007 the fund has returned over 40 per cent, against the benchmark return of 32.5 per cent. It also consistently outperformed the Nifty on a rolling return basis over the above period.
The scheme has overtaken pure large-cap funds such as Franklin India Bluechip and HDFC Top 200 and its peer the Sundaram BNP Paribas India Leadership post-June 2006. However, with over 85 per cent of assets in stocks with market capitalisation of over Rs 5,000 crore and the rest in mid- and nascent large-caps, the company's portfolio appears more comparable to Franklin India Prima Plus (FIPP). UTI Leadership has marginally lagged FIPP in the above period.
While UTI Leadership outpaced its peers in the recent past, investors should note that the superior long-term track record of the above-mentioned established funds make them a better choice.
Unlike a few other peers who moved to cash during the market correction in May 2006, the fund has consistently held at least 94 per cent in equity. This led to the fund declining slightly more than peers in the large-cap space.
Portfolio: The fund maintains a compact portfolio of about 30 stocks on most occasions. The top 5 stocks account for close to 28 per cent of the net assets.
Stocks such as Inox Leisure and Zee Entertainment appear to be emerging leader picks in nascent sectors such as media and entertainment.