UTI Mastershare: Invest ::Business Line

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Wary of the way markets are leaping and plunging? Then consider buying units of UTI Mastershare.

The fund follows a conservative investment style, sticking to sound large-cap stocks, sweeping holdings into cash and debt during falling markets, and not resorting to frequent changes in portfolio make-up.

A key feature that makes the fund attractive is that it has consistently paid out dividends every year, since its inception in late 1986.

The average market capitalisation of the fund’s June portfolio was Rs 68,958 crore. Large-cap stocks (market capitalisation of over Rs 7,500 crore) hold lower risk and are more stable than mid- or small-cap stocks.

Conservative investors looking for steady dividends or payouts from their equity investments and willing to hold for the long term can buy units of the fund.

PERFORMANCE

UTI Mastershare isn’t a star performer, falling into the mid-quartile section in terms of returns. It also doesn’t do spectacularly well during market rallies.

But the fund has beaten its benchmark BSE 100 by two percentage points over the three- and five-year periods. Performance in these periods has been better than the category average, too. Further, the fund does well during market downturns, clocking smaller losses than its benchmark.

In the two previous bear markets of 2008-09 and 2011, for instance, the fund contained downsides by six to eight percentage points more than the BSE 100. On a one-year rolling return basis over the past five years, the fund has done better than its benchmark a satisfactory 70 per cent of the time.

In the past eight months, though, the fund has fallen short of its benchmark owing to holding poor performers such as BPCL, Maruti Suzuki and State Bank of India.

One year returns at 12 per cent is below the BSE 100’s 14 per cent.

STRATEGY

The fund refrains from frequent churn of sectors or stocks, following a buy-and-hold strategy. It holds around 40 stocks, with 87 per cent of its June portfolio in large-cap stocks. Eight per cent of the portfolio is in mid-cap stocks with good fundamentals, such as Tata Chemicals and Gujarat State Petronet.

Banking has topped its sector holdings for the past several years, except briefly in late 2008. Picks, such as HDFC Bank, ICICI Bank and Axis Bank, have paid off well over the longer term.

The fund has begun to prune exposure to this sector which may be a prudent move given the cloudy outlook.

Other sectors usually accounting for high portfolio share are software and refineries. The fund added pharmaceutical stocks heavily from mid-2009. Apart from ITC, the fund has stayed away from the FMCG sector, which could explain its relative underperformance in the recent market rally. This also indicates a value-based investing strategy.

Auto, auto ancillaries and oil and gas are other sectors which the fund chooses from time to time to figure among its key holdings.