Launched in July 2005, UTI Opportunities Fund has been ranked Crisil Fund Rank 1 in the large-cap oriented equity category under the Crisil Mutual Fund Ranking methodology for the quarter ended December. Further, the fund has been ranked in the top 30 percentile of the peer group for the past eight quarters. The consistency in ranking can be attributed to efficient portfolio management and superior performance. The fund, which had average assets under management of Rs 2,385 crore for the quarter ended December, is managed by Anoop Bhaskar, head of equity at UTI Asset Management Company.
Investment style
The fund has dynamically managed its equity exposure. The fund reduced its equity exposure to an average of 91 per cent as against 93 per cent of the category over the past year, when the markets experienced high volatility. A similar strategy was followed during the economic turmoil in 2008. The fund reduced its equity exposure to an average of 76 per cent, much lower than the category average of 86 per cent during the volatile market phase between January 2008 and April 2009. Subsequently, the fund had gradually increased its equity exposure to an average of 87 per cent for the year ended April 2010.
Within equities, the fund has shown an inclination towards large cap stocks by taking an average exposure of 83 per cent to Crisil defined large-cap stocks over the past three years.
Performance
The fund has outperformed both the benchmark (BSE 100) and the category, with a significant margin for the time frames of six months, one, two, three and five years. For the past year, the fund gave a positive annualised return of nine per cent, as against negative returns of three per cent and one per cent by the benchmark and the category, respectively. Over the longer time frame of five years, the fund gave a compounded annualised growth rate (CAGR) of 16 per cent vis-à-vis seven per cent and eight per cent by the benchmark and category, respectively.
An investment of Rs 1,000 in the scheme since its inception (July 2005) would have grown to Rs 2,822 as on March 1, resulting in a CAGR of 17 per cent. As against this, a similar investment in the benchmark and category would have grown to Rs 2,290 and Rs 2,448, respectively, resulting in a CAGR of 14 per cent and 15 per cent, respectively.
Risk
The fund has generated higher returns than the benchmark and category, while maintaining low volatility over the past five years (see chart). The average monthly volatility for the fund over this period was 25 per cent vis-à-vis 26 per cent and 29 per cent for the category and benchmark, respectively.
Portfolio diversification
The fund has better diversification than the category, both at stock and sector level. The top five stocks of the fund constituted 28 per cent of its portfolio, as compared to 31 per cent for the category over the past year. For the same period, its top five sectors accounted for 53 per cent of its portfolio, as against 57 per cent for the category.
The fund has held an average of 36 stocks in its portfolio over the past three years, with none of the exposures exceeding eight per cent. In terms of sector exposure, the fund is well diversified, across an average of 19 sectors over the last three years. Diversification at the stock/sector level prevents erosion of the fund returns in case of slump in a single company or sector.
Dynamic sector allocation
It is positioned as a dynamic sector allocation fund. The fund will, at any given point, invest in only select sectors and dynamically change the allocation from one to another, depending on the potential risk reward. For instance, the fund took a contrarian call on the cement sector by taking exposure to stocks such as Ambuja Cements, Grasim Industries, ACC and UltraTech Cement. These stocks have given returns in excess of 20 per cent over the past year, vis-a-vis the benchmark’s negative three per cent over the same period.
During the global economic crisis of 2008, the fund had increased its exposure to defensive sectors such as pharmaceuticals and consumer non durables to an average of 14 per cent over May 2008 to April 2009, which was gradually reduced to an average of eight per cent till December 2009.
A similar approach was followed for the past year, when the fund increased exposure to consumer non durables and reduced exposure to underperforming sector like petroleum products and ferrous metals.
Within the consumer non durables sector, the fund held stocks such as ITC, Nestle India, Colgate - Palmolive and GlaxoSmithKline Consumer Healthcare. These stocks have outperformed the benchmark (BSE 100) over the year.
Crisil Research
