UTI-Mahila Unit Scheme: Invest
Women investors looking at debt-oriented funds that yield returns superior to traditional debt options can consider investing in UTI Mahila Unit Scheme, a balanced fund that seeks to hold a 70:30 debt-equity allocation.
The fund’s five-year returns of 18 per cent places it among the top performing funds in the debt category. A dynamic debt portfolio and quality stocks from the equity market have enabled the fund to maintain a good track record since its launch in April 2001.
Suitability: The fund is not a good fit for completely risk-averse investors, given its equity exposure. A one-third exposure to equity is the key to providing superior returns over the long term. Besides, its exposure to a combination of AA and AA+ debt instruments, suggests that while quality is not compromised, potential for higher yield comes at a slightly higher risk.
Performance: UTI Mahila’s one-year return of 25 per cent is marginally higher than its benchmark Crisil Debt Hybrid as well as its category average. Among other debt funds, a few monthly income plans such as HDFC MIP have beaten it as a result of their slightly aggressive equity exposure.
However, over a longer time frame of five years UTI Mahila has beaten top MIPs. Note that MIPs normally restrict their equity exposure to about 15 per cent. Those that recorded superior returns in this category did so by increasing their equity exposure to 20-25 per cent.
UTI Mahila has a good record of containing downside better than similarly positioned funds. For instance, FT India Life Stage FoF, another debt-oriented fund, lost as much as 22 per cent during its worst one-year period ending December 2008. UTI Mahila contained losses around the similar period to about 10 per cent.
In fact, the fund has even bettered it in-house peer UTI CRTS 81, in containing downside in the last downturn. Surprisingly the fund did not use the asset allocation strategy of drastically reducing its equity holding during the market crash. It instead, tactfully changed its debt portfolio maturity.
For instance, when interest rates were on the rise from late 2007, the fund reduced its portfolio maturity period to little over a year. A year later, in December 2008, when the bond rally was on, driven by declining interest rates, it increased the portfolio maturity to 4-5 years. Thus, it capitalised on the bond price rally, rather than shield equity losses.
The fund has once again reduced its average maturity to about two years in November 2009, clearly gearing for rate hikes.
Portfolio: The fund’s equity portfolio is laden with large and mid-cap stocks that gained significantly from their lows of 2009. Its exposure to individual stocks is, however, restricted to less than 2 per cent, as a result of which the fund holds as many as 50 stocks in its portfolio. Financial services, engineering and consumer goods are among its favourite sectors.
Among its debt holdings, debentures issued by non-banking finance companies are prominent. Government bonds account for less than 12 per cent of the portfolio, while a small proportion (about 4 per cent) is exposed to securitised debt; the latter typically held to maturity and to enhance portfolio yield.
