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Reopening of a Closed Era

The erstwhile UTI Master Value Unit Plan is about to turn open-end in a short while. With its re-launch, value investing will have another proponent.

What happens to closed-end funds when they complete their tenure? Are all units redeemed and the schemes shut down? Usually not. Instead these schemes are converted into open-ended funds. UTI is now converting its closed-end UTI Master Value Unit Plan (UTI-MVUP) into an open-ended fund. The scheme has been renamed as UTI Master Value Fund. Launched in July 1998, UTI-MVUP was perhaps the only fund whose unique selling proposition was investing in B group stocks on the BSE.

The scheme was due for redemption in June 2003. Unlike many other closed-end equity schemes, this fund has an enviable track record, even though investors have not been able to cash in on this due to problems of liquidity. The scheme did not offer any regular repurchase option and was not traded actively on any of the stock exchanges. Thus the decision to convert it into an open-end fund is good news for investors. UTI also aims to tap new investors. MVUP's new mandate of value investing will give investors yet another option in this category of funds. The portfolio has largely maintained a diversified flavour with a bias towards the FMCG, chemicals and metals sectors. Its performance graph has moved in line with other equity funds, outperforming in rising markets, and underperforming in falling markets. Thanks to the mid-cap rally of year 2002, the fund posted a return of 49 per cent against the category average of 21 per cent. And since its launch, it has posted a reasonable return of 13.80 per cent.

Also, MVUP seems to be immune to the perpetual problems of other UTI schemes. The portfolio has been actively churned to weed out non-performing stocks. Moreover, as it goes open-end, the pressure of maintaining its investor base makes it even likelier that the fund will maintain its good performance.