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UTI Midcap – A True Value Fund
Thu, Mar 06, 2014
Source : Citrus Interactive

UTI Midcap Fund is an open ended equity scheme which invests predominantly in midcap stocks. The fund was launched in April 2004 and is benchmarked against CNX Mid Cap Index. Currently, UTI Mutual Fund has proposed to merge UTI Master Value Fund (AUM Rs 501 crores as on January 2014) into UTI Midcap Scheme (AUM Rs 255 crores as on January 2014). UTI Master Value Fund (benchmark against S&P BSE 200 Index) came into existence in July 1998 having its investment strategy of bottom up investing in stocks that are relatively undervalued to their expected long term earnings growth.

Please note that the analysis of both UTI Midcap Fund and UTI Master Value fund has been provided.

Fund Performance

UTI Midcap fund has consistently outperformed its benchmark index and the category average return over 1 year, 3 year and since inception. The fund has been in the first quartile performance over these periods.

Scheme Name

YTD

1-Year

3-Years

Since Inception

UTI Midcap

2.16

25.35

12.43

17.69

CNX Mid Cap Index

-3.3

3.51

1.93

10.06

Category Average

-0.4

11.44

7.17

 

Rank

11/154

3/151

12/143

 

Figures are in % as on February 28, 2014; Returns above 1-Year in CAGR

UTI Master Value fund also has outperformed its benchmark index and category average return over last 1 and 3 year period. However, the fund is lagging behind its benchmark return since inception.

Scheme Name

YTD

1-Year

3-Years

Since Inception

UTI Master Value Fund

-1.18

18.11

7.39

12.33

BSE 200 Index Fund

-1.42

8.09

4.5

14.74

Category Average

-0.4

11.44

7.17

 

Rank

109/154

14/151

70/143

 

Figures are in % as on February 28, 2014;

UTI Midcap fund has consistently outperformed its benchmark and category average return during the last 5 calendar years barring CY 2010 where the performance is more or less at par with the benchmark and category average returns.

             

 

2009

2010

2011

2012

2013

UTI Midcap

106.98

18.94

-23.92

41.55

9

CNX Mid Cap Index

94.85

19.16

-31.00

39.16

-6.17

Category Average

83.66

19.26

-24.31

34.21

3.70

Rank

12/128

83/136

96/143

36/147

23/151

 

The performance of UTI Master Value fund is equally commendable with the fund outperforming its benchmark return during the last 5 calendar years barring CY 2012 where the performance is more or less at par with the benchmark return. The 5 year CAGR return of UTI Midcap fund (25.25%) is similar to UTI Master Value Fund (24.85%).

 

 

2009

2010

2011

2012

2013

UTI Master Value Fund

112.47

27.16

-25.16

30.39

8.53

BSE 200 Index Fund

83.65

16.22

-26.95

30.98

3.45

Category Average

83.66

19.26

-24.31

34.21

3.70

Rank

8/128

19/136

89/143

92/147

19/151

 

Sector Concentration: The concentration of both the fund in the top three, five and ten sectors is much lower than the category median.


 

Top 3

Top 5

Top 10

UTI Midcap

29.39

44.38

70.9

UTI Master Value Fund

30.51

44.08

67.91

Category Median

44.49

59.56

80.67

 

Company Concentration: Both the fund’s is highly diversified with concentration in the top three, five and ten companies in its portfolio is lower than the category median.

 

 

Top 3

Top 5

Top 10

UTI Midcap

16.06

24.32

40.14

UTI Master Value Fund

12.13

18.7

32.17

Category Median

19.26

28.99

47.02

Sector & Company Concentration signifies that both the funds maintain a highly diversified portfolio.

Risk and Risk-adjusted Returns:

Standard Deviation and Beta (measured over last one year) indicate that both the funds have lower risk level compared to the equity diversified category median.

Scheme Name

Standard Deviation

Beta

UTI Midcap

0.9566

0.6508

UTI Master Value Fund

0.9402

0.7147

Category Median

0.9606

0.8383

 

In terms of risk adjusted returns such as Treynor ratio and Sharpe ratio (measured over last one year) both the funds have delivered much higher return per unit of risks undertaken in the portfolio vis-à-vis its category median.

Scheme Name

Treynor

Sharpe

UTI Midcap

0.047

0.032

UTI Master Value Fund

0.0116

0.0088

Category Median

-0.0055

-0.0049

 

Process

UTI Midcap fund is primarily a midcap oriented fund which invests at least 65% of its net assets in companies which are constituents of CNX Midcap Index or S&P CNX 500 Index but not a part of BSE Sensex or Nifty Index. Furthermore no stocks which are among the top 50 stocks in terms of market capitalisation will form part of the aforesaid 65% of the net assets at the time of investment. The balance 35% of its corpus will be invested in equities of companies with a potential of consistent growth and are relatively undervalued to their expected long term growth. The fund can invest upto 20% in money market instruments.

UTI Master Value Fund follows a bottom up approach of investing in stocks which are relatively undervalued to their intrinsic value and uses the investment tools like low Price/Earning, low Price/Book Value and positive EVA (Economic Value Added). As per Scheme Information Document, upto 80% of the fund will be invested in companies having either low P/E, Low P/B, attractive dividend yield or positive EVA. The fund is committed to book profits periodically in order to retain the value orientation of the portfolio.

The investment processes at UTI gives autonomy to the fund manager to execute his investment strategy within the broad internal and regulatory guidelines.

The expense ratio of UTI Midcap fund at 2.56% and UTI Master Value fund at 2.47% is at par with the category median of 2.56%. Like most equity diversified funds both the funds have an exit load of 1 per cent on or before one year from the date of investment. Minimum investment in the funds is Rs 5,000.

Portfolio

UTI Midcap Fund

The fund holds 63 stocks in its portfolio as on January 2014 which is much higher than the median of 41 for the diversified equity category. The portfolio of the fund is highly diversified with an average holding of 61 stocks since 2009. Historically the fund has always held more stocks than the category median.

The fund has taken overweight position in Textiles, Automobiles, Software and Capital Goods sector, while have negative stance on Financial Services and consumer goods as compared to its benchmark Index. In the textile sector the fund has allocated 10% of its fund as compare to its benchmark which have 0%. The fund is underweight on financial sectors & allocated only 11% of its fund as compare to 18% in the CNX Midcap Index.

The fund has invested 51% in midcap stocks, 7% in small cap stocks & 39 % in large cap stock. The fund’s exposure to cyclical stocks currently is 68%, followed by Defensive at 18% and Services around 12%.The top five companies comprise of Arvind Ltd, Sun Pharma Advanced Research, Eicher Motors, Kaveri Seed and IndusInd Bank. Currently the fund has a cash and cash equivalents of 2.63%.

UTI Master Value Fund

The fund is highly diversified holding 73 stocks in its portfolio as on January 2014 which is much higher than the median of 41 for the diversified equity category. The fund has always been highly diversified with an average holding of 74 stocks in last one year.

The fund has taken overweight position in Automobiles, Pharma, Capital Goods, Fertilisers & Chemicals sector, while have negative stance on Financial Services, Software and energy sectors as compared to its benchmark S&P BSE 200 Index. The fund is quite underweight on financial sectors and allocated only 10% of its fund as compare to 23% in the S&P BSE 200 Index.

The fund has invested 41% in midcap stocks, 5% in small cap stocks & 52 % in large cap stock. The fund’s exposure to cyclical stocks currently is 63%, followed by Defensive at 19% and Services around 16%.The top five companies comprise of HCL Technologies, Indoco Remedies, Pidilite, Amarraja Batteries and Britannia Industries. Currently the fund has low cash and cash equivalents holding of 1.7% which is in line with low average cash holding of 1.9%.

Fund Manager

Anoop Bhaskar is managing both UTI Midcap Fund and UTI Master Value Fund. He is also the Head of Equity at UTI Asset Management Company since April 2007. He has a sound track record and over 20 years of experience in research and portfolio management. Prior to joining UTI AMC, Mr. Bhaskar has worked with Sundaram Asset Management, Templeton Asset Management and Shriram Financial Services Ltd. Other funds managed by him are UTI Equity, UTI Opportunities Fund, UTI Energy Fund, UTI Children’s Career Balanced Plan (Equity portion) and UTI Transportation & Logistics Fund.

Bhaskar has proved his skills as a fund manager by making some timely stock picks and currently all his equity funds are outperforming category average returns over last 3 years. He refrains from making highly concentrated bets even on better performing stocks. One may find short-term under-performance during some market cycles but over longer time periods his funds tend to perform better.

View

UTI Mutual Fund has proposed to merge UTI Master Value Fund (Merging Scheme) into UTI Midcap Fund (Merged Scheme). Investor/s are given an exit option to redeem his/her existing units at the prevailing NAV without any load from February 25, 2014 to March 26, 2014 (both days inclusive), for a period of 30 days, under UTI-Master Value Fund. On merger, the features of UTI Midcap Fund would be applicable to the merging scheme.

UTI Midcap Fund can be a good choice for investors having medium to long term horizon with some risk appetite for the following reasons:

1)            Performance of the fund manager has been amply demonstrated across all his schemes over last one, three and five year time horizon.

2)            We like the consistency and risk-reward ratio of both the funds.

3)            The merged fund will be primarily a mid cap oriented fund. Mid-cap stocks across different sectors may be poised to improvement in performance on likely improvement in Indian economy thus making for an attractive entry point from a long-term perspective.
 
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