Mutual Funds

UTI Opportunities Fund: Invest

K. Venkatasubramanian | Updated on October 22, 2011

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Investors can buy the units of UTI Opportunities Fund, given its ability to ride out market volatility with limited damage to its NAV. The fund's year-to-date decline of 7.4 per cent as against the over 15-per cent average decline witnessed in the equity fund category, is an example of its ability to limit downside risks.

This, coupled with its long-term track record of steady returns, makes it a good addition to an investor's portfolio. Over one-, three- and five-year time-frames, the fund has outpaced its benchmark BSE-100 by 7-12 percentage points. The fund contained downsides during falling markets, even while ensuring adequate participation when the indices turn around.

UTI Opportunities has delivered a compounded annual return of 14 per cent over a five-year period, which is the highest among funds in the ‘opportunities' category.

Even over a three-year timeframe, the fund's returns are higher than peers such as DSPBR Opportunities and Franklin India Opportunities.

Though, the fund is in the ‘opportunities' category, it is predominantly large-cap oriented, with exposure to mid-cap stocks(less than Rs 7500 crore market capitalisation) generally being 10-15 per cent of the portfolio.

In the market rallies of 2007 and 2009-10, UTI Opportunities outpaced the BSE-100, while in the correction of 2008-09 and over the past year, the fund has contained downsides better than its benchmark.

In the 2008-09 fall, the fund contained the fall in its NAV better than BSE-100 by a margin of 9 percentage points.

The fund may be a good diversifier for investors with a medium-risk appetite. The SIP mode may be used to average costs.

Portfolio and strategy: During the market correction of 2008-09, UTI Opportunities quickly moved into cash, debt and derivatives to contain the slide in NAVs. This was to the tune of almost 35 per cent during periods of high volatility.

In the initial leg of the rally from March 2009, the fund had higher exposure to sectors such as energy and industrial manufacturing that did not perform quite as well as some of the then momentum sectors. However, the fund benefited from being consistently invested in the auto sector over the years.

The fund increased exposure to sectors such as banks, consumer non-durables, and software and was able to ride on the upswing that these stocks witnessed. Being led by large-caps, this was all the more beneficial for the fund.

In recent months, the fund has reduced exposure to software, pharma and even auto. It has increased the weights given to other sectors such as cement, gas and also consumer non-durables. The consumer non-durables sector accounts for over 20 percent of the overall portfolio.

Overall, the fund appears to be focussing on taking safer bets and protecting value to deliver steady returns rather than put up a spectacular show.

UTI Opportunities does not take concentrated exposure to individual stocks and generally restricts it to less than five per cent of the portfolio, thus reducing the risk-profile of the fund. It maintains a compact portfolio of 35-40 stocks.

Published on October 22, 2011

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