UTI S&P BSE Low Volatility Index Fund

Are you ready to take your first step towards low volatile passive income ? UTI S&P BSE Low Volatility Index Fund is based on the S&P BSE Low Volatility Index Fund which is designed to track the performance of the 30 companies from the universe of S&P BSE Large Midcap. These companies are lower volatility stocks as measured by their standard deviation of the last 252 trading days*. Why UTI S&P BSE Low Volatility Index Fund? Diversified Portfolio of stable companies within the Large and Midcap segment: The Fund shall follow a passive strategy by investing into the constituents of S&P BSE Low Volatility Index, where the index construction is based on the “Low Volatility” within the universe of S&P BSE Large Midcap Index . “Low volatile” companies generally have lesser impact of market volatility “Low Volatile” companies generally mitigate drawdown “Low Volatile” companies represent relatively stable businesses with strong fundamentals & business models Focused and Disciplined: A diversified portfolio of stable businesses that are expected to deliver long term growth with lower volatility Long Term Wealth Creation: By investing only into companies that generate economic value the fund will endeavour to generate wealth for investors in the medium to long run The UTI Focused Equity Fund, which will be managed by Sudhanshu Asthana, will track the Nifty 500 total return index (TRI). The minimum investment in the scheme is ₹5,000, and in multiples of ₹1 thereafter. There will be an exit load of 1% in the scheme for less than one year, and nil after one year. According to the fund house, the scheme will follow a blend of growth and value style, with a growth tilt. Analysis There are about 20 focused equity schemes available in the market, and the category has delivered an average return of nearly 50% over the past one year. The fund house will leverage its research framework, investment process and the experience of its investment team to make its scheme unique in an already crowded segment. Stocks will be picked by a bottom-up approach, wherein preference will be given to quality companies with long runway for growth and transformation, and mean reversion opportunities. While building the portfolio, UTI MF will avoid companies with management issues, high leverage, sustainability challenges, inconsistent cash flows and inferior return on capital employed . The scheme will invest 65-100% in equity and equity-related instruments, up to 25% in debt and money market instruments, including securitized debt, and up to 10% in units issued by real estate investment trusts and infrastructure investment trusts. While the markets have had a decent run over the past year, the fund house believes that within each sector there are opportunities to invest, although some parts of the sector might be frothy. Overall, focused equity funds have failed to beat returns given by multi-cap funds, and financial advisers are of the opinion that investors would be better off with diversified equity funds. MY OPINION The purpose of mutual funds is diversification, but according to me, focused equity funds act as a mini-PMS (portfolio management service). In a mutual fund, investors should diversify across 50-60 stocks, but focused equity funds diversify in limited stocks. However, if a fund manager’s stock selection is correct, then such funds will perform well. Still, I believe that for retail investors, a diversified equity fund such as multi-cap or flexi-cap would be a better bet.