MC30 Scheme Review | UTI Flexicap fund; an all-weather equity mutual fund scheme

These new to the capital markets who want to put cash in fundamental and easy fairness funds to start with can have a look at flexi-cap or multi-cap funds to start their funding journeys. UTI Flexicap Fund (UFF; earlier often known as UTI Fairness Fund) is one such scheme you possibly can have a look at. This scheme is a part of MC30, Moneycontrol’s curated basket of 30 investment-worthy mutual fund schemes. In accordance with Securities and Change Board of India (SEBI) pointers, a flexi-cap fund has the leeway to speculate throughout large-cap, mid-cap and small-cap shares. Relying on the fund supervisor’s studying of the market, she will select her asset allocation between these three broad asset courses. UFF is the third largest flexi-cap fund, with property price over Rs 22,657 crore. Ajay Tyagi has been managing the fund since 2016.

Earlier, the scheme was a part of the multi-cap class. After SEBI carved out the brand new flexi-cap class in 2021, the scheme transformed itself right into a flexi-cap fund. UFF follows a bottom-up strategy of figuring out progress shares to spend money on. Tyagi says: “The philosophy of the fund is to purchase high-quality companies that generate excessive return on capital employed, having robust steadiness sheets with little or zilch debt and excessive money flows which might be creating financial worth.” Tyagi likes high-growth shares and follows a purchase and maintain technique.

This helped the scheme to ship a greater risk-adjusted return over the long run. Efficiency as measured by 10-year rolling returns calculated over the past 20 years reveals that UFF delivered a compound annual progress of 15.8 % whereas the Nifty 500 TRI (Complete Returns Index) gave 13.5 %. UFF delivered low returns between 2015 and 2018 as a result of on the time, progress shares underperformed worth shares. But it surely has made a comeback since.

UFF has participated fairly throughout market rallies whereas containing downsides fairly nicely throughout bearish phases. Nonetheless, UFF was certainly one of laggards throughout the class within the present market fall that began in October 2021. Tyagi attributes that the anticipated improve in rates of interest impacted progress shares far more. Tyagi additionally attributes his underperformance partly to cyclical shares like commodities, actual property, metals, power and state-owned banks doing nicely on this interval; UFF had stayed away from them.

Software program, banks, finance and pharma have been the fund’s high most popular sectors. Nonetheless, Tyagi explains that since he follows a bottom-up philosophy, sectoral weightages are an consequence of his inventory choice quite than any view on sectors. He prefers to deal with secular progress companies quite than cyclicals.

Prudent inventory choice helped the scheme. Most of Tyagi’s long-term holdings have paid off nicely. UFF is well-diversified. Shares like Divi’s Laboratories, Mindtree, Jubilant FoodWorks, Grindwell Norton and Astral greater than tripled in worth in the previous few years.

One-third of the portfolio has been allotted to mid- and small-cap shares. Tyagi says that UFF is really agnostic in direction of investing in large-, mid- or small-caps. The scheme doesn’t take a name on which market-cap bucket will do nicely and he builds publicity in one of the best companies throughout market-cap buckets.

UFF has not traded a lot and follows a purchase and maintain technique. That is mirrored in its turnover ratio, which was simply 9 % (as of June 2022), the second lowest within the class. Lots of its long-term holdings had been multi-baggers and rewarded buyers nicely. A low turnover reveals fund supervisor conviction.

UFF may be a part of your core portfolio with a time horizon of 5 years and extra.