Investors with a low risk appetite can consider taking exposure to the units of UTI Equity (UTI Mastergain-92 until 2005). From a poor show through the 1990s and in mid-2000, the fund's performance appears to have changed for the better in 2007, post a change in the fund's manager.

Improvement in performance is especially evident post the slowdown in 2008. The fund, with a large-cap orientation, has returned 19 per cent compounded annually over the last three years, beating its benchmark BSE 100 by 6 percentage points.

Suitability : UTI Equity's three-year record is very close to the returns of pure large-cap peers as well as large-cap biased funds such as Birla Sun Life Frontline Equity or DSP BR Equity. However the fund has differentiated itself by containing declines better than these funds during the 2008 downturn and has also demonstrated superior performance in the last one year of volatile market.

To this extent, it is ideal for investors who cannot stomach too much volatility. The fund cannot be expected to consistently match top performers such as HDFC Top 200 and may, at best, serve well as a diversifier.

Strategy : UTI Equity underperformed the broad market and peers in 2006, as the high cash exposure played spoilsport then. When the scheme's management changed hands in 2007, it retained its large-cap bias, but was more willing to invest 20-30 per cent in mid-caps.

However, it remained conservative during the ensuing slowdown, containing declines in 2008 to 45 per cent as against the category average of 52 per cent. The fund was slow to move to equities post the March 2009 lows but gained momentum subsequently , despite a rather diversified portfolio of 70-plus stocks. A good strategy of focussing on domestic consumption themes such as auto and consumer goods sectors, as well as keeping away from the more volatile infrastructure and power spaces, helped post the correction.

The fund returned 25 per cent annually over the last two years, outpacing most of the large-cap peers including HDFC Top 200. The fund's return over the last five years, at 15.4 per cent annually, though, is not top-notch. However, we believe the last three years' return may be more representative of future performance.

Consistency in performance is evident over this period, with the fund beating its benchmark 88 per cent of the times on a rolling return basis. Its return over the past one year — a period marked by volatility, at 11 per cent is a good 6 percentage points higher than the category average.

Portfolio : UTI Equity has been taking some right calls in sectors over the last year.

This could be one reason for its superior performance following the recent peak in November 2010. The fund, for instance, reduced its stake in public sector banks such as SBI and chose, instead, to hold private banks such as ICICI Bank and HDFC Bank.

This call saved it from getting beaten down after provisioning norms dragged down many a public sector banks' earnings. Similarly, over the last year, it pruned exposure to underperforming stocks in the petroleum sector, such as including Reliance Industries, protecting its portfolio from steep declines.

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