- Fund Name: UTI Mid Cap
- Fund Category: Small/Mid-Cap
- Fund Manager: Lalit Nambiar
- Fund Rating: 4 stars
- Investment Style: Mid Growth
- Analyst Name: Nehal Meshram
- Analyst Rating: Neutral
- Date of Analysis: August 2017
Mandate
This fund was merged with the UTI Master Value Fund in 2014 and since then it has followed a blended approach with a focus on value and growth stocks.
The fund’s investment process is well defined and true to label “mid cap” with at least 65% of its net assets in companies that are constituents of the Nifty Midcap Index or Nifty 500, but not a part of BSE Sensex or Nifty, at the time of investment.
The manager avoids companies having an annual average market capitalisation of less than Rs 75 crores and restricts the fund to invest in the top 50 stocks by way of market capitalisation, at the time of investment.
Process
The fund is positioned to benefit from the potential growth opportunity by investing in dynamic and well-managed medium-sized companies with high growth potential vis-à-vis their well-established peers.
Nambiar follows a bottom-up approach while selecting stocks and focuses on companies that have a fair track record, but which are passing through a transitory weak operational phase.
He focuses on management's track record, business model, and sustainability before making such investments. The risk/reward adjustment is through maintaining a well-diversified portfolio which would help the fund in generating steady returns across market phases.
Portfolio
The fund is well-diversified at sector and stock levels and refrains from taking highly concentrated bets even on performing stocks. The sector breakdown of the fund is mainly consumer cyclical, industrials, basic materials, and financial services. The fund's medium-term performance is less impressive; it has underperformed its benchmark as well as the category benchmark over one-year and three-year timeframes.
People
The team behind this offering remains one of the most experienced in the industry. The fund was earlier managed by Anoop Bhaskar; following his exit in December 2015, it is managed by Lalit Nambiar.
Nambiar has a sound track record of over 23 years in equity research, but he has yet to prove his skills as a fund manager.
We believe that the revamp in the equity fund management team, led by Vetri Subramaniam, who joined the fund house in February 2017, will prove beneficial over the long run. He has ensured that all the strategies within the fund house are well differentiated and has reorganised the equity team, aiming to push for style discipline among the managers.
Performance
The fund outperformed the category average every calendar year from 2009 to 2014. Unfortunately, it faltered in the last two calendar year - 2015 and 2016. This naturally has had a negative impact on its 1-year return (which is way below the category average) and 3-year returns.
Analyst Rating
Despite having a lower expense ratio and favourable market conditions for small- and mid-cap funds, the fund’s returns have been very disappointing. We need time to build our conviction in the manager, hence we have adopted a cautious stance and grant the fund a Morningstar Analyst Rating of Neutral.
