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Fund Focus: UTI Software

Large-cap focus brings in low risk but mediocre returns

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UTI Software has remained a large-cap player in the category of technology funds. The third-largest technology fund - with an asset under management of Rs 125 crore - has maintained its favour for the large-cap companies since its launch in June 1999. However, the fund's low exposure to mid- and small-cap companies, an average 35 per cent, has dampened its growth performance over the years. Other players in the technology category made huge gains by investing in small- and mid-cap as some of these companies went on to become large caps in due course of time. Since its launch, UTI Software failed to match its category returns in most of the quarters. Though the fund has a low standard deviation of 5.76 - the least among all its peers - this virtue is overshadowed by the dismal performance on the return front.

Sector giants like Infosys Technologies, Tata Consultancy, Satyam Computer Services have remained part of UTI Software's portfolio of a long time with high average allocations. For example, the fund has been holding Infosys for 36 months with an exceptionally high average allocation of 21.58 per cent. The steady growth of these large-cap companies has lend support to keep the volatility of the fund at the bottom. Of late, the fund's performance on the returns front has taken a turn for the better. UTI Software gave the third-best return in its category over the past one year, an improvement from the fifth slot it had in three and five-year returns chart.

One more area where the fund has been consistence is its manager. Sanjay Ramdas Dongre has been managing the fund since September 2001. Investors expecting decent returns with moderate risk will find this fund to their liking.