Product Review: UTI Mastershare
Review Date: 13th November 2016Rs. 10,000 invested in the New Fund Offering of UTI Mastershare fund in 1986 would have grown to Rs. 6.61 Lacs by the end of H1, 2016. With over Rs. 3,500 Crores of AUM as on date, it also carries the enviable tag of being India's oldest diversified equity fund. With a distinct large cap tilt, UTI Mastershare is quite clearly one of the more conservative funds within the diversified equity space. Even within large caps, the Fund displays a preference towards the so called 'giant' caps. 80% of the Fund's portfolio is invested into Large Cap stocks as on date; with HDFC Bank, Infosys and Axis Bank forming the top three holdings.
PerformanceThe Fund has outperformed its benchmark indices in the 3, 5 and 10 year timeframes, posting annualized returns of 16.45%, 12.65% and 11.07% respectively. It has a below average expense ratio of 2.15%, which can be largely attributed to the fund's low impact costs. It's worth noting that the Fund has a low Beta of 0.88, underscoring its focus on controlling risks and managing volatility.
Fund Management Style & PhilosophyUTI Mastershare has been managed by accomplished Fund Manager Swati Kulkarni for the past decade. A UTI veteran, Kulkarni also manages several of the AMC's other flagship funds, including UTI MNC Fund - since Aug 2005, UTI Dividend Yield Fund - since Dec 2005, UTI Top 100 Fund - since Jul 2011 and UTI Opportunities Fund - since Jan 2016.
The Fund follows a top down approach, starting by determining an optimal sector-wise split and subsequently investing into select large cap stocks within each sector. The style of management is distinctly conservative, with a clear preference for companies with leadership within their sectors as measured by their market dominance and quality of offerings. The Fund also considers financial strength (as indicated by a strong balance sheet) as one of its key criteria for stock selection.
Over the past 5 years, UTI Mastershare has been overweight in Pharma, Cement and Industrial Manufacturing; preferring to steer clear of volatile rate sensitive sectors such as construction, metals and energy. Sun Pharma, BPCL, Asian Paints, UltraTech Cement, Bharat Forge, HDFC Bank and Maruti Suzuki have been some of the traditional long term favorites of the fund.
Investment FrameworkThe Fund limits its exposure to one sector to the lower of 30%, or the sector weightage of the underlying index plus 7.5%. It restricts its exposure to a single stock to a maximum of 7.5% of the portfolio, with not more than 50% of the portfolio in the top 10 holdings. It also restricts its cash holding to a maximum of 10% of the portfolio, and exposure to a single company at below 7% of a company's equity.
Bottom LineAlthough this fund isn't a top quartile performer, it's structure and philosophy make it a good bet for relatively conservative investors who are looking to balance their debt fund allocations with stable and sustainable long term performance from equities. It is unlikely to emerge as a mater-blaster, but it's geared up to weather falling markets better and recover more quickly from market downturns. If you're chasing supernormal, aggressive returns, give this fund a pass.
Given the general overvaluation of global and local markets coupled with political headwinds, equities are likely to remain volatile for the next year or two. In such a situation, UTI Mastershare is a viable portfolio pick. Think of it as the 'Rahul Dravid' of diversified equity funds - not flashy or flamboyant, but consistent and reliable.
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