The fund may lack pizzazz, but it is a solid offering nonetheless.
2012 was admittedly an ordinary year for UTI Mastershare Unit Scheme. Not only did the fund fail to match its benchmark index S&P BSE 100, it also underperformed 74% of its category peers. However, the performance isn’t entirely surprising, given manager Swati Kulkarni’s investment approach.
To begin with, in an upturn such as 2012, when small/mid-caps fare better than large caps, Kulkarni’s typically lower allocation to smaller-cap fare versus the norm can lead to relative underperformance. Her focus on quality—established names with strong business models and good corporate governance standards—meant that she stayed away from some smaller names that fared well in the upswing. Also, since tactical plays aren’t a part of her strategy, Kulkarni is unlikely to be able to compensate after missing out on an inflexion point, as was the case in early 2012.
Notwithstanding the caveats, the mild-mannered approach has its appeal: It can keep the fund competitive on the risk front and deliver pleasing results over the long term. Delving deeper into the process reveals that Kulkarni is mindful of the benchmark index while investing. She plies a large-cap strategy and usually picks stocks from the S&P BSE 100 index. The portfolio’s sector weights are also loosely aligned to those of the benchmark index. Benchmark heavyweights like Infosys, ITC and HDFC Bank often feature among the top holdings. She has displayed good stock-picking abilities even with nonbenchmark stocks. For instance, her conviction in industrials player SKF India, on account of technology and cost advantages, has paid off over the long haul.
We believe the approach can play out well and hold the fund in good stead over a market cycle. Kulkarni has impressed us with her competent execution of the strategy. On her watch (Nov 2006 to March 2013), the fund has outscored 80% of its peers on the Morningstar Risk-Adjusted Return front. There is no reason to believe she won’t be able to deliver going forward as well. Hence, we reiterate the Bronze rating.
Morningstar Analyst Rating™
Large-cap focused and evidently mindful of the benchmark index.
Swati Kulkarni is a competent and experienced manager who is backed by a stable investment team.
In our opinion, UTI Asset Management Company is a typical asset manager.
Kulkarni plies relative valuation techniques when choosing stocks, with a qualitative overlay.
Under Kulkarni, the fund has been a strong performer on risk/reward parameters.
The fund’s price is lower than that of the median offering from the category.