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Off Track

This fund seems to have lost its way. However, its policy of holding on to sizable holdings of technology large caps offers some long-term advantages

Even though UTI Software couldn't live up to the great start it made in 1999, its policy of holding on to sizable holdings of technology large caps offers some long-term advantages. In 1999, UTI was one of the few AMCs who actually launched a technology fund before the great tech boom really took off. It too rallied and had a flying start in 2000-returns zoomed to 52.97 per cent in the first quarter as against the 28.09 per cent return of average peers. In the next three quarters it underperformed the category. However, the great start was enough to make the fund number one in 2000.

This was also the end of the rosy days for the fund. 2001 stretched tech funds to the extremes. UTI Software finished in the bottom quartile, down a massive 43.26 per cent as against 35.29 per cent loss of average peers. The fund failed to recover in 2002 and once again underperformed the category. The next year was relatively better-the fund gained 41.74 per cent-but not enough to beat the average peers. Last year, UTI Software once again failed to impress. The fund finished second last in the category with a return of 19.59 per cent.

UTI Software has always maintained a large-cap bias and they have saved the fund from sinking at times. However, it has not played its mid- and small-cap cards well-despite maintaining a nearly 40 per cent exposure to them in 2003 and 2004, the fund underperformed. Calls like I-Flex Solutions, Polaris Software, Geometric Software Solutions, and Hughes Software Systems failed to reward the fund.

Large cap picks like Satyam Computers, in which the fund maintained an average over 9 per cent exposure throughout 2004, too did not prove very helpful-the stock could manage only a single digit return last year. Overall, this fund's performance has been discouraging. However, there are a few good things about it. The fund manager's taste for large cap stocks and the policy of sticking to them for long periods of time are good signs. For example, the fund has maintained nearly 20 per cent exposure to Infosys Technologies since 1999. Wipro and Satyam too have found a permanent place. A relatively well-diversified portfolio is another positive aspect.