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UTI Dividend Yield Fund
Dividend Yield as a theme is popularly associated with a defensive strategy. This fund however has the distinction of beating its benchmark in the last bull market, in the crash that followed and in the subsequent recovery thereafter.
Fund Manager : Swati Kulkarni
Managing the fund since : Dec 2005
Benchmark : BSE 100
Fund Strategy
UTI Dividend yield Fund fund's strategy is stay close to stated investment philosophy of investing at least invest 65% of its assets in high dividend yield stocks. Dividend yield is considered as high if it is greater than the dividend yield of the S & P CNX Nifty at the time of investment. High dividend yield is the initial filter used for selecting companies out of the investable universe; factors such as future earnings prospects, sustainability of cash flows, management competence, competitive advantages, and industry scenario vis a vis the valuation are considered in the evaluation of a company's investment worthiness. Having invested in the high dividend yielding stocks the Fund may stay invested in the stocks even after the yield drops below Nifty dividend yield provided exposure to such stocks is below 35% of the portfolio at any point of time.
While sticking to above stated investment frame work the fund manager pursue a portfolio mix of large and mid caps with bias towards the former. The fund manager keeps a diversified portfolio by investing across sectors and capitalization. The fund follows a disciplined investment guideline in terms of sector weightage (not more than 25% in one sector) stock weightage (not more than 8% in a single stock) and number of stocks (at least 35).
Fund Performance
The fund boasts of an excellent performance spanning across market cycles i.e. bull and bear phase. The fund has also outperformed its benchmark i.e. BSE 100 on various time periods
The fund's consistent outperformance over its benchmark has been widely recognized in the form of Crisil CPR 1 rating (as on Mar, 2011) and Value research 5 star rating (as on Apr 2011). The top validation from industry substantiates the fund' superlative risk adjusted performance over a long term period.
In general, stock selection, Overweight and / or Underweight calls taken from time to time and maintaining a well diversified portfolio contributed to the consistent performance. Specifically for the past one year, the overweight in IT and Cement stocks, underweight position in industrials and construction, exposure to select stocks in Fertilizers, Chemicals, and Auto and Consumer stocks helped the performance.
Sectoral and thematic preferences
On the backdrop of stated investment policy, the fund is primarily invested in sectors comprising high dividend yield stocks. The Fund follows a bottom up investment style. Historically Financials, Oil & Gas, Software, FMCG, Auto, Cement, Fertilizers, Shipping and Metal have been the sectors with high dividend yielding stocks providing the Fund a well diversified investment universe. Capital intensive sectors such as Industrial Manufacturing, Power and Telecom generally do not have high dividend paying companies. The fund maintains a sector mix of underweight and overweight position compared to its benchmark i.e. BSE 100 to derive portfolio diversification and performance. Such positions are taken both strategically and tactically based on macro environment and sectoral outlook. Currently fund is overweight on sectors like Cement Fertilizers, Shipping, Power utilities and PSU oil stocks and underweight on Financials and Metals.
The Fund does not have any thematic preference as it follows a bottom up approach towards stock picking.
Fund Manager's outlook
Says Swati Kulkarni, "We are cautiously optimistic about the performance of Indian Equity. The valuation of BSE Sensex and S & P CNX Nifty at close to 14.5 times FY 2012 and 12.5 times FY 2013 is below the long term average valuation of 15 -16 times. The macro headwinds such as high inflationary expectations and interest rates, slowing growth and fiscal and current deficit situation may result into a range bound movement in the short term, however, any improvement on these, be in terms of softening crude and commodity prices and / or normal monsoon could act as a catalyst as the valuations are supportive. We believe from 12 to 18 months perspective Indian equity looks relatively attractive. Global factors such as Eurozone Debt restructuring and growth in US post QE 2 are sources of risks affecting global flow of funds. We will maintain a portfolio mix of growth and value while keeping it fairly diversified both at a sector and stock level."
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