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Suresh Krishnamurthy

INVESTORS in UTI Growth & Value can retain their units despite the scheme's indifferent performance in the past 12 months, when it underperformed a number of its peers. Its performance record over a longer period of three years has, however, been impressive, as is its record since its launch in 1999.

Investors, however, need to be watchful about future performance. The fund was previously managed by IL&FS Mutual Fund and was taken over by UTI a little over a year ago. Subsequent to the acquisition by UTI, the fund manager also changed. In addition, there has been a significant fall in the assets under management, which dropped from Rs 280 crore at the end of July 2004 to Rs 132 crore at end-February 2005. Though investments to the tune of about Rs 50 crore flowed into the fund in March 2005, the fall in assets is significant, as is the deterioration in performance. Further slippage may require investors to reduce their exposure to this fund.

UTI Growth & Value is a diversified equity fund with the mandate to invest 70 per cent in growth stocks and the rest in mid-caps. In the mid-cap segment, investments would be made in stocks that are mostly undervalued. The Fact-sheet also says that the "portfolio would be actively managed to exploit market volatility" — meaning trading costs will be high for the fund, and the manager hopes to generate returns that more than compensate for the increased trading costs.

Performance: The fund has generated annual returns of 42 per cent over the past three years. This compares favourably with that of many other diversified equity funds. In the past year, though, the returns were just 15 per cent, which compares poorly with that of many other equity funds. The lag may, however, be due to the volatility in funds flowing in and out.

Portfolio allocation: The fund had a cash position of nearly 24 per cent at the end of March 2005. This may be due to the substantial inflows seen that month.

The higher cash position may have helped as the market has been trending down since March 2005.

The fund has 33 stocks in its portfolio. Exposure to each stock is at about 5 per cent or lower.

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