Focused on safety, liquidity
The benchmark Nifty has recovered all its losses seen in September to end at a record high on Friday.
Launched in January 2014, UTIBanking & PSU Debt Fund is classified under the debt-short category of CRISIL Mutual Fund Ranking. The fund has been constantly ranked in the top 30 percentile (CRISIL Fund Rank 1 or 2) over the past four quarters ended June 2017. It has been managed by Sudhir Agarwal since January 2014. It has quarterly average assets under management of ~1,324 crore at the end of June 2017 quarter.
The fund’s primary objective is to generate steady and reasonable income, with low risk and high level of liquidity from a portfolio of predominantly debt and money market securities by banks and public sector undertakings. Superior performance The fund has consistently outperformed its benchmark (CRISIL Short Term Bond Fund Index) and peers (schemes defined under the debtshort category of CRISIL Mutual Fund Ranking June 2017) across all periods under analysis.
An investment of ~1,000 in the fund on January 27, 2014 would have grown to ~1,391 (9.23 per cent CAGR, or compounded annual growth rate) on October 23, 2017 vis-à-vis ~1,376 (8.91 per cent CAGR) for the peer group and ~1,383 (9.06 per cent) for the benchmark.
A systematic investment plan (SIP) is a mode of investment offered by mutual funds to retail investors through which one can invest a certain amount at a regular interval. UTIBanking & PSU Debt Fund outperformed its benchmark in all periods. Duration management The fund has actively managed duration compared to its peers in response to movement in benchmark yields (G-secs, or government securities) over the past two years. From October 2015 to September 2016, when yields were headed southwards, the fund maintained a higher duration than peers to benefit from the fall in yields as bond prices move inversely to interest rates. The fund returned 9.81 per cent absolute returns during this period compared with peers’ 8.49 per cent. When yields were on the rise from November 2016 to April 2017, the fund protected downside for investors by maintaining a lower duration than peers. Portfolio analysis Over the past two years, the fund maintained about 80 per cent exposure to highest rated debt securities (‘AAA/A1+’) and G-secs. It took minimal exposure to sub-AAA rated instruments (1.98 per cent on average) and maintained high liquidity with only eight per cent exposure to non-liquid securities. This indicates the fund’s emphasis on safety and liquidity.
During the past two months, the fund shifted allocation from G-secs to corporate securities to benefit from higher yield. As of September 2017, non- convertible debentures and bonds dominate the portfolio with about 75 per cent exposure into AAA-rated securities.