UTI India Lifestyle Fund: Sector selection, lower volatility help stay ahead

The consistency of fund's performance can be attributed to higher returns while maintaining lower volatility

UTI India Lifestyle Fund was launched in July 2007 and has been classified as a large-cap oriented equity fund under the CRISIL Mutual Fund Ranking wherein it has been CRISIL Fund Rank 1 (very good performance) for the quarter ended March 2013. The fund (earlier classified as diversified equity fund) has been in the top 30 percentile (CRISIL Fund Rank 1 or CRISIL Fund Rank 2) since June 2011. The consistency of the fund’s performance can be attributed to higher returns while maintaining lower volatility.

The fund’s average assets under management (AAUM) were Rs 329 crore for the quarter ended March 2013. The fund is managed by Lalit Nambiar, senior vice-president and fund manager (equities) since July 2011.

Investment objective
The investment objective of the scheme is to provide long-term capital appreciation and/or income distribution from a diversified portfolio of equity and equity-related instruments. It is a theme-based fund that intends to primarily invest in sectors, and companies that are expected to benefit from changing Indian demographics, lifestyle and rising consumption pattern.

Performance
The fund has outperformed both its benchmark (CNX 500 Index) and the category average across time frames (six months, and one, two, three and five years).

Over the past five years, the fund has given annualised return of 10.98 per cent compared to 5.28 per cent and 7.86 per cent by its benchmark and the category, respectively.

The fund has lower volatility (measured by standard deviation) at 16.79 per cent compared to the benchmark (19.72 per cent) and the category (17.83 per cent) over three-year period ended as on June 24, 2013.

A monthly investment of Rs 1,000 over five years under the systematic investment plan (SIP) until June 24, 2013 would have grown to Rs 80,277 (on a total investment of Rs 60,000) yielding an annualised growth rate of 11.70 per cent.

A similar investment in the benchmark would have grown to 68,375 at an annualised growth rate of 5.21 per cent.

Portfolio strategy
Over the three-year period ended May 2013, the fund has maintained around 94 per cent in equity and equity related instruments. The fund has maintained 76.5 per cent of its equity exposure to large cap stocks (based on total market capitalisation) over the past three years.

In line with the theme, the fund has been overweight on consumer non-durables (by around 10 per cent), finance and consumer durables compared to the benchmark and the category.

These sectors represented by the CNX FMCG Index, the CNX Finance Index and S&P BSE Consumer durables index gave 31.67 per cent, 10.54 per cent and 19.54 per cent annualised returns, respectively, compared to 3.46 per cent of the CNX 500 index (as on May 31, 2013).

Also, underexposure to underperforming sectors such as petroleum products, industrial capital goods and power helped the fund’s performance. Among its top 10 holdings, performance of eight stocks (like ITC, Hindustan Unilever, HDFC and CRISIL) helped the fund generate superior returns.

The fund has a diversified portfolio concentration at both the stock and sector levels compared to the category. The fund has held an average 47 stocks compared to the category’s 40 in the three-year period. At the sector level, the fund’s exposure to the top five industries is 57 per cent against the category’s 50 per cent.
CRISIL Research