UTI Brand Value is a specialty fund, launched as part of the UTI Growth sector series. While entry into the fund is at NAV, the fund levies an exit load of 2%. Within a year of launch, the fund paid its maiden dividend of 10% in May 2000.
Sectoral funds often try to capture the special growth opportunities offered by a particular sector. UTI Brand Value however, is not a sectoral but a specialty fund. The fund seeks to leverage the strategic advantage that companies enjoy with their brand image – in terms of popularity and acceptance. These brands lend the company an edge in a competitive market. Further, despite its well-defined universe, the manager can build a diversified portfolio of established companies with prominent brand names. UTI Brand Value started off with a portfolio comprising predominantly of top rung FMCG stocks. However, the portfolio got diversified to gradually include the ICE stocks such as Satyam, SSI, NIIT, VSNL etc. Thanks to a burgeoning corpus due to dividend in May, the combined exposure to ICE stocks peaked in June and accounted for 46 % of the corpus. Today, the portfolio predominantly comprises of FMCG and ICE stocks accounting for 45.3 and 32 % of the portfolio, respectively.
With FMCG stocks being out of market favour, the increasing exposure to the technology counters paid rich dividends for the fund. The fund posted an impressive gain of nearly 100 % at the peak of the rally in February 2000. However, with the markets being on a tailspin since April, with technology leading the pack, the fund has suffered erosion in NAV. The fund has posted an annualsied return of (10.43%), while the Sensex has posted a notional gain of 0.69 % over the same period.
UTI Brand Value, with its focus on companies with well-established brands, has built a portfolio of quality stocks. However, with the markets in a volatile trading zone, any sustainable gains could come by only in the long run.