UTI Mastershare Fund: Focusing on Resilient Businesses

UTI Mastershare Fund is a well-managed Large Cap Fund that has a track record of generating stable returns and rewarding investors with reasonable risk-adjusted returns over the long term.

Past performance is not an indicator of future returns
Data as on August 17, 2022
(Source: ACE MF)

During its journey spanning over three and half decades, UTI Mastershare Fund has positioned itself as a reliable fund having a steady track record. While the fund has not been able to generate significant alpha over the benchmark during bull market phases, it has done well to contain the downside risks during bearish phases. UTI Mastershare Fund outperformed the category average and benchmark index by a remarkable margin in 2020 and 2021. However, the fund's performance has slipped in the current year (YTD basis). Nonetheless, over the longer 3-year and 5-year periods, UTI Mastershare Fund stands among the top performers in the category, while over the 7-year period its returns are competitive to the category average.

UTI Mastershare Fund also stands strong in terms of risk-adjusted returns. The volatility registered by the fund is nearly in line with the category average, though lower than the benchmark index, while its Sharpe Ratio (0.19) is higher than that of the category average as well as the benchmark.

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Investment strategy of UTI Mastershare Fund

Classified under the Large Cap Fund category, UTI Mastershare Fund is mandated to invest a minimum of 80% of its assets in equity and equity-related instruments of large-sized companies. Accordingly, the fund holds a predominant large-cap biased portfolio. It holds some allocation to mid and small-cap stocks as well. Aiming to avoid concentration risk, UTI Mastershare Fund holds a well-diversified portfolio of 45-50 stocks spread across sectors. The fund takes a top-down view to determine sector weights and then uses the bottom-up approach for stock selection in the portfolio.

UTI Mastershare Fund endeavours to buy-and-hold stocks in the portfolio with a long-term view and consequently, it has had a low portfolio churning rate of around 30% in recent months. The fund's portfolio construction focuses on companies with a strong competitive franchise, with a focus on profitability and capital structure. It invests primarily in fundamentally strong companies by considering the factors such as, but not limited to, financial strength, sustainable cash flows, earnings growth potential, attractiveness of valuation, scalability of business, management quality, etc. It follows the Growth at Reasonable Price (GARP) investment style to invest in quality businesses at reasonable valuations.

UTI Mastershare Fund usually holds a fairly large portfolio of around 45-50 stocks. As of July 31, 2022, the fund held as many as 50 stocks in its portfolio, with top 10 stocks together constituting around 47.3% of its assets. ICICI Bank is currently the top holding having an allocation of 9.7% closely followed by Infosys and HDFC Bank. Other index heavyweights like Bharti Airtel, Reliance Industries, HDFC Ltd., and TCS, are next on the list of top holdings having an allocation of about 3% to 4% in each. Notably, 4 out of top 10 stocks in the portfolio belong to the banking sector. Many of the stocks in its top 10 holdings have been part of the portfolio for over two years now.

In the last one year, UTI Mastershare Fund benefitted immensely from its holdings ICICI Bank, Bharti Airtel, SKF India, ITC, Titan Company, and SBI that contributed the most to its gains. It also benefitted from its holdings in Maruti Suzuki India, Reliance Industries, Sun Pharma, Eicher Motors, and Tata Motors, among others.

In terms of sector, Financials top the list of allocation with an allocation of 31.2% which includes exposure of about 23.9% in Banks and 7.3% in Finance. Infotech, Consumption, Pharma, Engineering, Auto, Telecom, and Petroleum Products are the other core holdings in the fund's portfolio having an allocation in the range of 4-13%. The top 10 sectors together account for around 82.3% of its assets. UTI Mastershare Fund's portfolio is fairly diversified across Cyclical and Defensive sectors along with some allocation to Sensitive sectors.

Suitability

UTI Mastershare Fund is a prudently managed fund that has shown robust performance in the last couple of years by focusing on quality stocks available at reasonable valuations. The fund has achieved this feat without exposing the portfolio to undue risk. It holds a fairly diversified portfolio of stocks along with reasonable exposure across cyclical, defensive, as well as sensitive sectors. Thus, UMF appears to be well placed in terms of generating steady returns for investors in the long run.

UTI Mastershare Fund has an experienced fund manager at the helm, Ms Swati Kulkarni, who has been managing the fund for over 15 years now. Under her supervision, the fund has stood strong during tough market conditions while its performance during bull market phases has been satisfactory as well. The fund is well placed to compete with its prominent large-cap peers and generate growth of capital in the long run.

UTI Mastershare Fund is suitable for cautious investors looking for a relatively stable Large-cap Fund that can offer decent capital appreciation at a reasonable risk level.

Warm Regards,
Divya Grover
Research Analyst

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Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.

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About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

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Disciplinary history

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13. I V Subramaniam.

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