Mutual Fund - UTI Thematic Large Cap Fund – Growth : Analysis

UTI Thematic Large Cap Fund – Growth

Type: Equity Diversified
Launch Date: 07-Apr-2004
Fund Manager: Swati Kulkarni

The rally in the last year has been chiefly driven by large cap stocks and some select midcap companies. Unlike the previous rally, where the length and breadth of the market participated in the upward movement, only a section of the markets has witnessed significant appreciation. Most of the equity-oriented funds which had a major allocation in the large cap blue-chip companies have in general managed to outperform, but going against the trends, UTI Thematic Large Cap fund has not been able to reap the full advantage of the current rally as much as the investor would have liked to.

The scheme has trailed its benchmark index BSE Sensex by 18 per cent in the last one year, placing the scheme at the bottom of the table. UTI Thematic Large Cap fund has been in existence for more than two and a half years, which is a relatively long period to judge the scheme, considering the fact that the scheme has seen both sides of the markets in the interim period.

The scheme was launched along with five other theme-based funds simultaneously. The other themes being midcap, basic industries, auto, banking and PSU. Though thematic funds provide a more focused approach towards investment, they also rank higher in the risk-return scale. But, contrary to this, investing in a large cap oriented fund involves lesser amount of risk, because the portfolio is diversified across several sectors. The restriction is more on style of investment rather than in the areas of investment. Therefore a thematic fund which concentrates on a particular sector or multi-sectors, like an Infrastructure fund will definitely have a different risk profile compared to UTI Thematic Large cap fund.

UTI large cap Fund has a policy of staying fully invested into equities at all times, apart from brief period in times of market downturn – to restrict the losses, and currently the scheme has more than 95 per cent of the net assets into equities. The scheme has been true to its investment mandate as well, and has not ventured into the midcap and small cap at all to generate excess returns.

The fund has a tiny corpus of Rs 28.07 crores, which is very low, compared to some of its peers, and this has not helped the scheme's performance at all. A large cap oriented portfolio requires a decent corpus size to take meaningful positions on the stocks. The portfolio is presently spread across 27 scrips, which is optimal.

The scheme in the last two quarters has starter greatly mimicking the BSE Sensex basket, as 85.93 per cent of the total portfolio is invested into Sensex scrips. The average exposure prior to that was around 60 per cent. The strategy of shifting the allocation towards the Sensex scrips does not seem to have worked in the scheme's favour as in terms of month-on-month performance; the scheme is lagging the benchmark in the last couple of quarters.

The scheme in the last one year has been bullish on Software sector, which has helped it put up an average show. The fund manager was big on the Banking sector till late last year, but currently the scheme is underweight on the sector. Some of the other sector like Power has also gone completely out of favour which has impacted the returns, whereas exposure to Pharmaceuticals sector has been hiked. Considering the fact that the market is flooded with similar kind of large cap oriented funds, which have been around for quite a while and have a proven track record, investors, who wish to invest in these kind of funds as a core investment strategy would be better off to reallocate their holdings in better performing schemes.

Performance as on February 07, 2007
	Absolute			Compound Annualized
Scheme Name	3 Months	6 Months	1 Years	Since Inception
UTI Thematic Large Cap Fund - Growth	6.1893	24.5351	30.2949	28.5067
Rank	141/164	144/162	27/133	-- --
BSE Sensex	10.5486	33.5838	48.671	-- --
Peer Group Average	10.0388	33.6398	33.103	-- --