Monday July 23, 01:40 PM
UTI India Lifestyle Fund |
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By Personalfn.com
Summary
Type :Close-ended (3-Yr) Equity: Diversified
Benchmark :S&P CNX 500
Min. Investment :Rs 5,000
Face Value :Rs 10
Entry Load :Nil
Exit Load :Nil*
Issue Opens :July 02, 2007
Issue Closes :July 25, 2007
*Although the exit load is nil, the investor will have to bear the balance proportionate unamortised initial issue expenses while exiting during the close-ended tenure of the scheme.
Investment Objective*
To provide long term capital appreciation and/or income distribution from a diversified portfolio of equity and equity related instruments by primarily investing in sectors, areas, companies and themes that are expected to benefit from changing Indian demographics, Indian lifestyles and rising consumption pattern. However, there can be no assurance that the investment objective of the scheme will be achieved.
*Source: Offer document
Is this fund for you?
UTI India Lifestyle Fund (UTI-ILF) is a 3-Yr close-ended fund with an automatic conversion into an open-ended scheme at the end of the stipulated tenure. The fund seeks to capitalise on the opportunities emerging from the changing Indian demographics, lifestyles and rising consumption pattern.
The NFO aims to capitalise on the rising income profiles of the young working class. It will invest in companies/sectors that are likely to be major beneficiaries of the growing consumerism. The indicative investment universe of the fund, comprises of sectors like automobiles, housing, telecom, consumer finance and entertainment among others.
By limiting itself to lifestyle-related sectors, the fund stands to lose out on investment opportunities in other sectors/themes like infrastructure, banking, finance (particularly industrial finance) and software. Although, the fund does have a provision to invest a portion of assets in such sectors, the bulk of its investments will be in lifestyle-related sectors.
By pursuing a narrow investment theme, we believe the fund deprives investors of the benefits of diversification, which is a fundamental trait of mutual fund investing. If there is a dip in consumer spending for whatever reasons (like a rise in interest rates or a slowdown in the economy for instance), the fund is likely to witness a shortage of investment ideas. A well-managed diversified equity fund on the other hand can shift its assets to sectors that are immune from these concerns.
Moreover, equity funds from UTI Mutual Fund haven't exactly redeemed themselves over the years. Their performance has been modest, at best. Although they now have Anoop Bhaskar in their midst, one of the more competent fund managers in the country, it is not a good enough reason for investors to invest in UTI Mutual Fund. At Personalfn, we place a higher premium on the investment processes pursued at a fund house (since they are relatively more permanent) rather than a star fund manager (who can leave the fund house in the lurch any time).
In our view, investors should give UTI-ILF a miss. Instead, they must opt for existing, well-managed diversified funds, such as DSP ML Opportunities (51.68% CAGR over 3-Yr, 51.2% CAGR over 5-Yr), HDFC Equity (53.0% CAGR over 3-Yr, 50.2% CAGR over 5-Yr) and HDFC Top 200 (50.0% CAGR over 3-Yr, 49.9% CAGR over 5-Yr).
Portfolio Strategy
UTI-ILF will invest between 65%-100% of net assets in equity/equity related instruments of sectors/areas likely to benefit from changing Indian demographics, Indian lifestyle & rising consumption pattern. It can also invest upto 35% of assets in stocks from sectors that do not fall in the above-mentioned category and upto 20% of assets in debt and money market instruments.
| Instruments |
Allocation Range |
| Equity and equity related instruments |
65%-100% |
| Other equity and equity related instruments |
0%-35% |
| Debt & money market instruments including securitised debt |
0%-20% |
The fund house will adopt the bottom up (i.e. stock specific) investment approach for stock picking, i.e. it will aim for a stock-specific investment strategy rather than a sector-specific strategy. So if a particular stock is doing well, the fund will invest in it irrespective of the performance of the sector or market segment to which it belongs. However, since the fund has indicated that it will take thematic/sectoral bets, in all likelihood it will pursue an investment approach that embraces both, the top-down and bottom-up investment styles.
The fund may use derivatives, mainly for hedging, subject to the guidelines issued by SEBI (Securities and Exchange Board of India) from time to time and in line with the overall investment objective of the scheme.
Fund Manager Profile
Mr. Anoop Bhaskar, an MBA, is a Fund Manager and Head of Equity at UTI Asset Management Company Private Limited. He has 14 years of experience in fund management and equity research. Prior to joining UTI, he was in-charge of all equity products at Sundaram Asset Management Company. He was also associated with Templeton Asset Management Company for a period of ten years as Senior Research Analyst and Portfolio Manager.
Outlook
Given the fund's narrow, thematic investment mandate, it will be a high risk investment proposition for investors. We expect the fund to perform in patches. When its chosen sectors witness a rally its performance will look up, on the other hand, when these sectors witness a slowdown, its performance will drop.
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