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Conservative hybrid funds that invest a chunk of their assets in debt instruments are ideal for risk-averse investors chary of market volatility. These funds are mandated to invest 75-90 per cent of assets in debt securities and 10-25 per cent in equities.
UTI Regular Savings Fund (erstwhile UTI-MIS Advantage plan) has been a consistent long-term performer within the category. Post SEBI’s MF categorisation norms, UTI Monthly Income Scheme, UTI Smart Woman Savings Plan, and UTI - Unit Scheme for Charitable & Religious Trusts & Registered Societies (UTI-C.R.T.S.) were merged into UTI-MIS Advantage Plan, which then was renamed as UTI Regular Savings Fund.
From an investment strategy perspective, there has been no significant change in the nature of the fund, as it had been predominantly investing in debt and capping equity exposure at 23-25 per cent in the past. The fund has delivered a tidy 10.6 per cent return over longer 5-10-year period. It has outperformed category returns by 60-100 bps across time periods.
Conservative investors with a 3-5-year time horizon can invest in the scheme.
Deft calls
The fund has been able to deliver healthy returns across market cycles — both bull and bear — thanks to its deft calls. In the 2014 market rally, both in bond and equity market, the fund delivered 21 per cent returns — stock picks such as Titan, Gruh Finance, Motherson Sumi Systems, Page Industries, etc, paid off handsomely. UTI Regular Savings also delivered healthy 7-9 per cent returns in 2015 (a lacklustre year for bonds) and 2016.
Its timely paring of government securities and shifting investments towards corporate bonds in 2017, helped deliver good 12.5 per cent returns last year, even as interest rates spiked and impacted performance of long-duration gilt funds.
Through 2018, the fund has maintained higher allocation to corporate bonds, reducing G-Sec exposure to 6-odd per cent, in light of the rise in interest rates and possible rate risk going ahead. It has also moved into cash (16 per cent of assets currently) over the past 2-3 months, mitigating risk of market volatility both in equity and bond market.
Portfolio
On the debt side, the fund has been investing predominantly in G-Secs and high-rated AA+ and above corporate bonds, which lowers the credit risk. Within equity, too, it invests predominantly in large-caps, which lends comfort.
As of October 2018, the scheme has 6.8 per cent in G-Secs, and about 51 per cent in corporate bonds, of which about half is in AAA and AA+ rated bonds. Vodafone Idea, YES Bank and AFCONS Infrastructure are among the notable holdings in the AA rated category.
The fund has about 24 per cent exposure to equity, holding quality stocks such as Bajaj Finance, HDFC Bank, IndusInd Bank, Infosys and TCS.
UTI Regular Savings’ average maturity is about 3.5 years (helps cap rate risk), and yield to maturity is an attractive 9.7 per cent.
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