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UTI Mastershare Unit Scheme – 3 Decades of History in Wealth Creation

In Business
August 12, 2019

UTI Mastershare Unit Scheme is India’s first equity oriented fund (launched in October 1986) and having track record of wealth creation for over 30 years. UTI Mastershare Unit Scheme has a long standing track record of uninterrupted annual dividend distribution across all market cycles – be it bearish or bullish.

UTI Mastershare Unit Scheme, an open ended equity scheme predominantly invests in large cap companies having competitive advantage in their respective fields. It follows an investment style of Growth at Reasonable Price (GARP) for stock picking. That means, given the underlying growth in earnings of a company, how much is the reasonable price that one should pay to buy that stock in the portfolio. This approach gives it a framework to buy companies having future earnings growth as well as valuation comfort.

The competitive franchise that UTI Mastershare Unit Scheme looks for is built over a long period of time by companies that are fundamentally strong with control on borrowings, consistent revenue growth, focus on profitability and higher return on capital than cost of capital and consistent operating cash-flows generation. Such companies generate free cash flows for future expansion and avoid dilution of existing shares. Typically such companies enjoy pricing power for a long period of time.

This combined approach of GARP plus Competitive Franchise enables UTI Mastershare Unit Scheme to invest in companies where,
1. The market is underestimating the companies’ ability to sustain growth over much longer phase or the benefits of pricing power.
2. The growth trajectory is improving through industry wide phenomenon like favorable demand cycle, consolidation, clearances of regulatory hurdles or through the company specific factors like cost competitiveness, prudent capacity expansion.
3. The business is capital intensive but the companies invest prudently, execute efficiently
4. The companies having opportunities to reinvest cash flows at high Return on Capital Employed (RoCE)
5. The relative valuation within the sector is attractive.

This in turn gives the investors a long term wealth creation opportunity with lower volatility, by owning a portfolio of quality companies.

UTI Mastershare Unit Scheme being categorized as Large Cap Fund, thus has a portfolio of leading well-known companies such as, HDFC Bank, ICICI Bank, Infosys, Tata Consultancy Services, Larsen & Toubro, HDFC Ltd, Kotak Mahindra Bank, ITC, Axis Bank, Bharti Airtel Ltd. etc., The Top 10 stocks account for about 50% of the portfolio. The Scheme is currently overweight on private sector banks, rural facing NBFC, IT, Industrial Manufacturing and underweight on Energy, Financial Services, and Consumer Goods as of July 31, 2019.

The Fund has a corpus of over Rs. 5,800 crore with over 5.92 lakh live investor accounts as on July 31, 2019. The Fund aims at securing capital appreciation / or income distribution over a long term, follows a disciplined approach to invest as stated above and has maintained stream of annual dividends every year since its inception. UTI Mastershare Unit Scheme has distributed a total dividend of more than Rs. 3,000 crore in last 15 years.

This style pure scheme maintained its large cap orientation with above 80% in past for longer periods and will continue to maintain in future too. The scheme has been a steady performer and has lower portfolio churn. UTI Mastershare Unit Scheme has generated a return (CAGR) of 15.48% against benchmark S&P BSE 100 TRI return of 13.96% since inception as on July 31, 2019. Furthermore, investment amount of Rs. 10 lakhs made in the fund at inception has grown to Rs. 11.25 crores as against Rs. 7.28 crores as per benchmark S&P BSE 100 TRI during the same period, i.e., generating 112 times returns over the last 32 years.

UTI Mastershare Unit Scheme is suitable for those equity investors who are looking to build “core equity portfolio” with relatively stable and sustainable performance from a large cap portfolio having quality large cap companies and also for such investors who would prefer regular dividends and capital appreciation over long term.