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The ‘Conservative Hybrid Fund,’ which falls under the new categorisation of mutual funds as prescribed by the Securities and Exchange Board of India (SEBI), is suitable for investors with medium risk profile, wanting to taste some equity risk.
The funds under the category invest 10-25 per cent of their total assets in equity and the rest in debt instruments. The higher allocation to debt helps steady growth of principal with minimal risk. The equity component, on the other hand, helps spice up returns.
These funds are suitable for retirees or people nearing retirement who can shift part of their investment from high-risk assets to such relatively low-risk funds.
UTI MIS Advantage Plan is one such fund under the conservative hybrid funds category. With the new category classification, the fund also undergoes change in its name to ‘UTI Regular Savings Fund’ with effect from May 3, 2018.
The fund has invested 23-25 per cent in equities, and allocated the rest to debt and money market instruments.
Returns
The fund has delivered 8.3, 8.4 and 11.1 per cent annualised returns during one, three and five years, respectively, while the category posted 6.6, 7.8 and 9.8 per cent returns.
The fund has performed well across interest rate cycles over the last seven years. In a rising rate scenario too, the fund has been able to cap losses well, thanks to its efficient duration calls coupled with the accrual strategy. During the period of rising rates between May 2013 and April 2014, and July 2017 and March 2018, the fund delivered an absolute return of 6.2 and 2.4 per cent respectively, while the category registered 4.7 and 1.4 per cent returns during this period. Given its large-cap orientation in equities, the fund has delivered relatively higher returns in bear phases but registered moderate returns in bull phases.
Portfolio
Over the last five years, the fund has maintained a well-balanced portfolio by allocating 23-26 per cent to equities and the rest to debt. On the equity side, the fund follows a multi-cap approach, investing across sectors and market-caps.
The ratio of large vs mid-cap stocks stood at 85:15 over the last five years. Financial services (8 per cent), healthcare (3.2 per cent) and IT (2.3 per cent) are the top three sectors. Bajaj Finance, IndusInd Bank and YES Bank are the top three stocks.
In the fixed income portfolio, the fund manager takes active duration calls. The average maturity of the portfolio has come down to 5.5 years from seven years over the last one year.
Allocation to G-Secs pruned
Over the last two years, the fund pruned its allocation in G-Secs (to 25 per cent from 37 per cent) while increasing the investment in corporate bonds (to 43 per cent from 26.5 per cent). AA rated bonds comprise one-fourth of its portfolio currently.
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