I would like to start an SIP in UTI Midcap Fund for a horizon of at least 5 years. Its 5-yr return is over 23 % and 10 year return is little over 20 %. But I found that in the well-respected Value Research ratings, it is only rated 4-star. Please let me know why this fund is not rated 5-stars even though the fund has performed well in 1, 3 and 5 year horizons? This will really help me decide whether to invest in this fund.
- Senthil Kumar Thirunavukkarasu
We don't just go by a fund's return profile to arrive at the rating. The risk that the fund takes on to deliver this return also matters. The Value Research rating is a composite measure of both returns and risk. You can refer to the following link for a more detailed description of the rating methodology:
https://www.valueresearchonline.com/fund-rating-methodology//a>.
You should also note that the ratings are relative. It is possible that some other funds in this category have generated higher risk-adjusted returns than this fund, which resulted in UTI Midcap Fund being rated four stars. Rating is just one key criterion to pick funds with a proven track record. Other factors should also be considered while investing in a fund such as your time horizon and risk appetite.
UTI Midcap is a consistent performer as it has outperformed its benchmark as well the category average, in six out of ten years of its history. It is among the top ten performers in the past one year and was a part of the analyst's choice recommendation in our Anniversary issue too. It has managed to reward the investors with superior returns and makes a compelling pick in the mid & small category.
You can go ahead and buy it.
This article was originally published on January 07, 2015.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
