UTI Mutual Fund launches two new schemes

UTI Mutual Fund has announced two new schemes "" UTI Long Term Advantage Fund (LTAF) and UTI Capital Protection Oriented Scheme (CPOS) "" which are close-ended schemes with a lock-in period of minimum three years.

The LTAF is an equity-linked savings scheme, which offers an option of investing primarily in equity markets and thus the potential of generating higher returns while CPOS comprises two plans "" 3-year plan and 5-year plan with a specific maturity date. The offer closes on March 20 and January 25, 2007, respectively.

"LTAF aims at providing medium to long term capital appreciation along with income tax benefit under Section 80C. The scheme will invest in those emerging growth companies that are believed to offer greater appreciation potential than the growth in the relevant stock market indices, in the long term,'' said R Raja, senior vice-president, UTI AMC.

On CPOS, which is targeted at investors who are risk averse and usually don't prefer equity or equity-related instruments, Raja said, "The orientation of the scheme is towards protection of capital which originates from the portfolio structure of the scheme. It aims to protect capital by investing in high quality fixed income securities as the primary objective and generate capital appreciation by investing in equity and equity-related instruments as secondary objective."

The company has set a target of Rs 900 crore for LTAF, minimum initial investment for which is Rs 500 and in the multiples of Rs 500. Under Section 80C of the Income Tax Act, tax benefit will be available only up to a maximum amount of Rs 1 lakh.

The normal allocation of asset would be in 80-100 per cent of net assets in equity and 0-20 per cent in debt and money market instruments.

Swati Kulkarni, fund manager, added that UTI-CPOS would invest in a portfolio predominantly of fixed income securities that are maturing in line with duration of the respective plans.

The scheme will follow a passive investment strategy for its fixed income component by investing in the highest rated debt securities, with focus on companies that have the potential to appreciate in the medium to long term, she said. The scheme is expected to raise Rs 400-500 crore.

The minimum initial investment would be Rs 10,000 and Rs 5,000 for growth option. Raja said that the company was coming up with frequent schemes because of the demand.

"The times have passed when a single scheme had a huge subscriber base. People are demanding different types and options of schemes and hence one has to provide them these schemes differently," he added.