An actively managed hybrid Index fund is what you can call UTI Index Select Equity. It aims to invest in a basket of securities drawn from the 50 Nifty companies and the 30 BSE Sensex companies.
Between 2000 and 2001 the fund was amongst the best performing diversified equity funds; losing the least during these two horrific years. But since then there has been a gradual decline in the fund's performance. The fund's performance over 2006 brought a ray of hope for investors of this fund - the fund delivered 40.26 per cent against the category's average return of 34.69 per cent. But then again 2006 was clearly the year of the large caps. Whether its performance over the last year was a mere aberration remains to be seen. So far, this year the fund has delivered a 4.32 per cent (As on June 20) return as against the category's average year to date return of 7.36 per cent.
A look at the portfolio reveals that it is extremely aggressive in its sectoral allocation of funds. Since August 2006, the fund manager has dedicated close to 30 per cent of its investible corpus in the technology sector. In fact the average allocation to Infosys Technologies over the past 66 months has been as high as 7.72 per cent. Moreover, the top two sectors enjoy an allocation of more than 45 per cent. The other two sectors where the fund manager has placed large bets are financial services and energy. However, such a high concentration has not translated to volatile returns and the fund's risk grade remains below average.
Don't expect the fund to deliver awe inspiring returns; given that its universe of companies is restricted to less than 80 companies, the fund misses out on many potential multi baggers.
This article was originally published on August 02, 2007.
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