UTI Hybrid Equity Fund Portfolio Strategy - June 2021

 

UTI Hybrid Equity Fund (HEF) - An aggressive hybrid equity fund with investment in equity instruments ranging between 65-80% and balance in debt instruments. The equity portion of the portfolio is managed with a flexi - cap value orientation and average equity allocation is broadly around the range of 70-75%.

We realign the equity weight in the portfolio when it breaches the above-mentioned allocation range to equities. In the current market environment, we are comfortable with an equity allocation of 72% in the portfolio.

The debt portion of portfolio follows an accrual strategy with tactical play on the duration based on in-house views. The fund focuses on liquidity and credit quality of debt instruments, which forms part of the portfolio.

 

 We had increased equity allocation towards mid and small cap in the month of December 2020 and January 2021 while maintaining it at the same levels in May 2021. With the gradual recovery of the economy, we are positive on the long term prospects of mid and small cap companies in general. We would endeavour to limit our investments in mid and small cap companies around 30% of the portfolio.

Fund Manager’s view going forward:

1. Focus on benchmark stocks: We had initiated the process of focusing on top benchmark stocks in January 2020 which was 46% and increased our weight in the top 20 stocks to around 53% of the portfolio which we have maintained throughout the financial year 2020-21.

2. Focus on domestic recovery stocks: We are structurally positive on the domestic recovery and intend to increase exposure to financials and automobiles which we believe are prime beneficiaries of domestic recovery. We are also overweight on industrials, real estate and infrastructure which will also benefit from the recovery.

3. Focus on growth oriented mid and small caps: It may be easier to find growth oriented mid and small caps at reasonable valuations and our focus is identifying growth oriented small caps and mid-caps. We have taken decent exposure across companies in IT services, alcohol beverages, shrimp processing, plastic pipes and pharma.

               Sector Allocation:

Sector	Sector Weight (%)	Active Weight (%)	Comments
Financial Services	31.19	-1.98	We have maintained the exposure in this sector as last month(April), and are looking to add banks in the portfolio both in the large and mid-cap space. We remain underweight on NBFC, however we have exposure to insurance stocks.
IT	14.66	1.79	We see stability in IT sector given the huge shift in the digital business and possible improvement in the margins. We continue to prefer large caps in this space.
Energy	8.44	-5.02	We continue to be underweight on the account of Reliance Industries Ltd. We are looking to identify companies in the gas space.
Construction	7.38	4.85	We continue to be positive on the sector on both infrastructure and real estate companies. We added a real estate company in the portfolio month of May.
Others	12.17	0.88	Our key weights are in telecom, cement, and textiles where we continue be positive.
Automobile	7.34	1.72	The portfolio comprises of private vehicles, two wheelers and commercial vehicles, original equipment manufacturers and couple of auto ancillaries. We continue to be positive on domestic recovery and remain positive on automobiles.
Pharma	7.19	2.38	We continue to be positive on the sector given the strong tailwinds on the domestic pharma sector and rebound in exports.
Consumer Goods	7.23	-4.47	The high valuations in the sector preludes us from going overweight on the sector. While the sector has underperformed in the last one year, valuations remain high relative to its long term history.
Industrial Manufacturing	4.41	2.77	We have maintained exposure in this sector and continue to back it as a good proxy for Industrial capex recovery.

Note: Data as of May 31, 2021. The equity portion is rebased to 100%.

 The benchmark used for calculation of Active weight: S & P BSE200.

 

UTI Hybrid Equity Fund (An open-ended hybrid scheme investing predominantly in equity & equity related instruments) This product is suitable for investors who are seeking

  Long term capital appreciation

§  Investment in equity instruments (maximum - 80%) and fixed income

§ securities (debt and money market securities)

* Investors should consult their financial advisers if in doubt about whether the product is suitable for them