Mutual Fund - UTI Opportunities Fund : Analysis

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Investors can retain their investments in UTI Opportunities Fund. Having lagged the benchmark by a huge margin in 2006, the fund's performance appears to have gathered momentum over the past year. Since the fund has a track record of less than three years, however, investors need to evaluate its performance over a longer period before making any fresh commitment to the fund.

UTI Opportunities takes concentrated exposures to a clutch of four-five sectors at a time. As such, its profile fits somewhere between a diversified fund and a sectoral fund.

Suitability: As the fund takes concentrated exposures to fewer sectors, it has a higher risk profile. According to the offer document, the fund follows a dynamic sector allocation strategy. That is, it moves in and out of sectors depending upon the potential risk-reward.

Its performance, therefore, depends on the fund manager's ability to make the right calls on sector trends, and time entry and exit accordingly. The fund may, therefore, be more suitable for investors with a higher risk appetite.

Performance: The performance in the initial period after the fund's launch was unimpressive, with a return of just 6.5 per cent in 2006. It appears to have changed tack, with recent portfolios looking more promising.

The fund's NAV has grown by 40 per cent in the past year and outpaced the benchmark by 12 percentage points. DSPML Opportunities, which follows a similar strategy, delivered 29 per cent during the same time-frame. UTI Opportunities has shown some improvement in consistency of performance.

In 2006, the fund trailed the benchmark BSE-100, in eleven out of 12 months. However, over the past twelve months, it has outperformed the latter at least 50 per cent of the time. During August 2007 and the recent correction too, the fund contained losses better than the benchmark.

Portfolio: The compact portfolio has just 35 stocks. The top five sectors corner 68 per cent of the assets. Stock-specific exposures were capped at 8 per cent. The fund invests predominantly in large-cap stocks. As per the latest portfolio, the exposure to stocks with market capitalisation of less than Rs 7,500 crore was just about 22 per cent.