UTI Opportunities Fund is a fund with a large-cap tilt that can pick stocks from the BSE 100 universe. Launched in Jul 2005, it has recently hit a rough patch and a fund manager change. A look at its performance.
Like with all my mutual fund reviews, the focus (at least mine) is on the method and the tools used. The fund is only an excuse to showcase freefincal tools. This review should not be treated as investment advice.
Before we look at detailed results, anyone can do a simple analysis of the funds performance at Value Research.
1: Do not compare peers. It is an apple vs orange comparison.
2: Head over to the performance tab in the fund page and you will sea graph like this.
Set the duration as 3Y and place your mouse on the scroll bar (marked by the oval) and slowly move it to the left. Then each frame you see is a 3Y window. This is a simple way to check if the fund has beat its benchmark.
In the above frame, I have selected a from date as Sep 2014. This is to show that the fund has underperformed the BSE 100 price index (dividends not included) for more than two years now.
More importantly, it shows that the funds poor run started well before Swati Kulkarni took over from Anoop Bhaskar as the fund manager in Jan 2016.
Before we discuss the investment strategy, let us have a look at its performance against BSE 100 Total Returns Index (dividends are assumed to be reinvested).
If we look at the performance of the fund each month for the last 9 years and asked how it fared in the below graph,
A pretty mixed bag! And this in the last 3Y,
Rolling Lump Sum Returns: 3 years
If we consider every possible 3Y period from 31st Jan 2007 to Feb 10th 2017, we will get 1731 periods. For example from 31st Jan 2007 to 30th Jan 2010 (1st period)
from 31st Jan 2007 to 30th Jan 2010 (1st period)
from 1st Feb 2007 to 31st Jan 2010 (2nd period) and so on.
The returns calculated for every such 3 year period is shown below, followed by similar data for 5Y periods.
Rolling Lump Sum Returns: 5 years
The recent underperformance of the fund is immediately clear.
Rolling SIP Returns: 3 years
If you were to do the same analysis for 3Y and 5Y SIP periods, this is what you would get.
Rolling SIP Returns: 5 years
Here again, the underperformance in the recent past is clear.
Normally, I would say, “keep an eye”, if you are an existing investor. Regular readers may know that I have been more than tolerant with HDFC Equity and HDFC Top 100. It is certainly not a bad idea to give this time some more time.
However, two statements in its scheme information document makes me concerned a bit.
The main highlight of this scheme is to respond to the dynamically changing Indian economy by moving its investments amongst different sectors as prevailing trends change. The scheme will allow the fund manager to invest in select sectors based on his views of the macro economy.
UTI-Opportunities Fund will predominantly invest in 4 to 5 sectors that are expected to outperform the broader market in the short to medium-term.
As markets evolve and grow, new opportunities for growth keep emerging. UTI Opportunities Fund would endeavor to capture these opportunities to generate wealth for its investors.
The aim of the scheme is to outperform plain vanilla equity funds, which are more diversified but at the same time minimise the risk arising from pure sector funds while generating a reasonable return.
It says it will dynamically respond to changes in the economy in the short and medium term (which should be about 3-5Y) and also aim to outperform typical diversified equity funds.
If a fund makes a statement such as this, then peer comparison becomes mandatory. I would expect it to do reasonably well in a category over at least 5Y if not 3Y. If I look at its MorningStar page, that is not the case. It’s rank over 5Y is 56.
The only thing in its favour is the low portfolio turnover. Most of its portfolio appears to be unchanged in the last few years. Perhaps the fund manager is waiting. Only time will tell if this is a good strategy or not.
If you are an existing investor, you can track the returns month by month from the date in you invested using the Mutual Fund SIP XIRR Tracker. Keep an eye on the performance and if it does not pick up, or if you currently not satisfied, then consider a switch.
For new investors, I would suggest staying away from funds that aim to beat other diversified funds. This unnecessarily hikes expectations and stress.
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