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Unit Scheme '95

With most of the gains coming only in 1999, it remains to be seen whether Unit Scheme '95 has a credible equity investment strategy to sustain returns in the long-term.

Unit Scheme '95 is an open-end balanced fund from Unit Trust of India, seeking to invest between 40-60%, each in equity and debt. The fund carries a minimum investment of Rs 10000.

Since launch, Unit Scheme '95 has given an impressive annualised return of 17.73%. However, most of the fund's gains came from its equity portfolio in the rising markets of 1999, which the fund has mostly managed to hold on to, despite the bear grip on the bourses for over a year now.

The fund took off in 1995 with a large allocation to debt instruments and exposure to equity limited at 15%. However, despite the conservative strategy and high interest rates, the sustained downturn in the equity markets turned the fund into an average performer. With equity markets gaining strength in 1999, the fund was quick to change tack with a higher allocation to equity (25% in June 1999) and restructured its portfolio in favour of Technology sector.

The strategy, aided by the tech wave, yielded bountiful gains in line with the Sensex. Besides bluechip technology stocks, the fund invested in mid rung stocks that rose rapidly in the tech bull-run. While the surging gains came to a halt in early 2000, the fund still ended the year with a spectacular gain of 26% against a category loss of 11.5%. Thanks to the two dividends it declared in a short span in 2000, a good amount of fresh money flowed in. Going further, the fund gradually cut back its allocation to technology while took time to deploy the cash. On the debt front, the fund has largely maintained a static portfolio of corporate papers with no exposure to government bonds. Further, for want of proper disclosure, the credit quality is not known.

Unlike most funds in the UTI stable, US '95 has been able to deliver returns with an actively managed portfolio. The fund's performance especially stands out in the light of the controversy and disappointment over Unit Scheme '64. Currently, it is a conservative balanced fund with a debt-equity ratio of 65:35. However, with most of the gains coming only in 1999, it remains to be seen whether the fund has a credible equity investment strategy to sustain returns in the long-term.