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UTI Opportunities Fund - Tracking Opportunities

| 7/4/2011 2:49 PM Monday

The Indian equity market has been on a roller-coaster ride for the last few months with a slightly negative bias. Most of this weakness is attributable to the rate hikes by the RBI to combat rising inflation, which in turn has led to an impact on the growth prospects. Then there were the corporate scams, persisting sovereign debt concern in the Euro zone and a general weakness on the global economic growth front. However, the situation in the market is not all that bad since the current valuations are fairly comfortable from a longer term perspective, corporate earnings are expected to grow at a compounded rate of 13 to 15% in the coming years and many sectors and stocks are trading at fairly attractive valuations.

Hence, for investors who are looking to create long-term wealth, the current scenario could be an opportune time to invest in diversified equity funds like the UTI Opportunities Fund in a staggered manner. This fund focuses on capitalising on opportunities arising in the market by responding to the dynamically changing Indian economy. It seeks to do so by moving across sectors as per the prevailing trends. This fund tends to concentrate on four to five sectors at any given point in time which, in the view of the fund manager, is likely to relatively out-perform the broader market. It follows a growth style of investing with a top down approach of selecting sectors and then selecting stocks within sectors.

It does not have any market-cap bias. However, it is currently biased towards large-caps with 73% of its net assets invested in such stocks. The fund was launched in the year 2006 but had a bad run initially. However, since March 2007, when Harsha Upadhyaya started managing this fund, it has changed its fortunes. From March 30, 2007 to June 24, 2011, the fund has delivered an annualised return of 18.25% as compared to 9.08% given by its benchmark, the BSE 100. The fund has outperformed its peers as well as the benchmark in both bull as well as bear markets.

In the bullish years of 2007 and 2009, when the BSE 100 delivered a return of 59% and 85% respectively, the fund delivered a return of 71% and 98%. During the bear market of 2008, the benchmark fell by 55% whereas the fund fell by only 49%. Not only in terms of performance but also in terms of risk-adjusted performance, the fund has been in the top quartile with a Sharpe Ratio of 0.38.

As mandated by the fund objective, Upadhyaya actively rotates within different sectors and manages a slightly concentrated portfolio with around 35 to 40 stocks in it.

The top ten stocks account for 48% of the portfolio and the top five sectors account for 53% of the portfolio. The fund’s investment strategy of taking relatively concentrated bets in a few sectors and active sector rotation make this fund a suitable option for investors seeking higher return by following an aggressive investment style. Moderately aggressive and aggressive investors can look at investing up to 10% of the equity portfolio in this fund in a staggered manner.

 

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