On A Sound Footing - UTI Dividend Yield Fund

In the current volatile market, buying companies with high dividend yield can be taken into serious consideration as it prevents the downside. Therefore, even low risk investors can consider this fund. The fund has an investment philosophy by which it selects the stocks with high dividend yield that may have strong cash generation and may be undervalued with potential capital appreciation. The fund has well defined investment criteria which includes sector and stock weightages, limit on number of stocks which might be around 40-45, and market capitalisation. However, the fund provides flexibility to stay invested in the stocks with lower dividend yield of up to 35 per cent of the net asset. The fund also invests in the derivative instruments mainly to catch the arbitrage opportunities put forward by the market.

The fund uses bottoms-up approach for stock selection with no market-cap bias, while the investment style is a blend of growth and value stocks. Such investment strategies not only help the fund to appreciate in the reviving market but also limit the downside in falling market. However the fund manager feels that due to the defensive strategy the fund might not be a top performer in the bull run as other aggressive funds might perform better, while the fund will surely be a good bet during the volatile conditions.

The fund has benefited from the right calls made in the mid cap space earlier, while, since December 2007, the fund has sifted to the large cap stocks which has helped the fund in recent time. The sectoral allocation has also helped the fund’s performance. Recently, the fund has increased its weightage in FMCG and Phama sectors on account of the valuations that have corrected sharply and also the growth visibility. However, looking forward, the fund manager is bullish on banks as they have corrected sharply and stocks are available at a lower price to book value. The same holds true for the fertilizer sector due to some reforms that are expected and also the FMCG as this sector is domestically driven and might get least affected by the ongoing global turmoil.

Swati Kulkarni is a distinguished fund manager and has been associated with UTI’s fund management since 1998. Swati manages both active and passive funds like Mastershare, Equity Tax-Saving, MNC, Master Index, Nifty Index, Sunder, and Variable Investment. And most of these funds have displayed impressive performances. Over a three and one year period, the fund has managed to give returns of 7.70 per cent and minus 41.41 per cent, while the category returns stood at 1.28 per cent and minus 52.05 per cent respectively. The fund, in the last six months, has increased its debt allocation to 15 per cent. Thus considering the fund manager’s competence and performance of the fund, investors can take exposure to this fund through SIP.