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How good is UTI-Dividend Yield Fund

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April 22, 2005 17:52 IST

 Summary
  • Type
    		•  Open ended diversified (Equity)
  • Benchmark
    		•  BSE 100
  • Min. Investment
    		•  Rs 5,000
  • Face Value
    		•  Rs 10
  • Entry Load
    		•  2.25% (Maximum)
  • Exit Load
    		•  Nil
  • Issue Opens
    		•  April 11, 2005
  • Issue Closes
    		•  May 3, 2005

     Investment Objective

  • The investment objective of the Scheme is "to provide medium to long term capital gains and/or dividend distribution by investing predominantly in equity and equity related instruments, which offer high dividend yield. There can be no assurance that the investment objectives of the scheme will be realised."

    •  Is this fund for you?

    UTI-Dividend Yield Fund (UDY) falls in the rather sparsely-populated category of dividend yield funds within the diversified equity fund segment. Funds from this segment aim to clock growth by investing in stocks with high dividend yield.

    These funds loosely draw from the investment strategy 'Dogs of the Dow' which involves picking ten stocks from the index Dow Jones Industrial Average (DJIA) based on high dividend yield.

    Dividend yield is defined as the dividend per share divided by the share's market price at the time of investment.

    Within the diversified equity funds space (a high risk category), UDY is likely to be a medium to high risk investment proposition and should find favour with investors who are looking to diversify within the equity fund segment.

     Portfolio Strategy


    UDY intends to invest in stocks offering high dividend yield. The fund has defined dividend yield as "high" if the same is greater that the dividend yield of the Nifty last released/published by NSE (approximately 2.50% according to the fund house).

    Instruments Allocation Range
    High dividend yield equity and equity related instruments 65-100%
    Other equity or equity related instruments 0-35%
    Debt and money market instruments 0-10%

    UDY will invest a minimum of 65% of its corpus in "high dividend yield instruments" at all times; the upper limit for the same has been pegged at 100%. The fund has kept some leeway by mandating that upto 35% of its corpus can be invested in other equity/equity related instruments; these stocks will have the potential to become high dividend yielding stocks. UDY can also invest upto 10% of its corpus in debt and money market instruments.

    The fund will not restrict its stock picks in terms of market capitalisations and will take exposure across the spectrum. Clearly, both UDY's stock selection and portfolio management strategy will be closely governed by its investment objective.

     Fund Manager Profile


    Mr. Vinay Kulkarni is a B. Tech from IIT Mumbai and a PGDM from IIM Bangalore. He has a total work experience of 14 years comprising of 12 years in the Mutual Fund industry and 2 years in the software industry. He manages UTI Mastergain, UTI Master Equity Plan Unit Scheme and UTI Mid Cap among others.

     Outlook


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    Broadly speaking, funds from UTI Mutual Fund fail to inspire too much confidence; albeit a fund like UTI-Master Value has pitched in impressive performances over longer time frames.

    But even this fails to impress when you consider that it was outperformed by its benchmark index. Also the fund house in its current avatar has been in existence for a relatively shorter time frame and may be it is prudent to give it some more time before it establishes its credentials beyond being just a large and well-known fund house.

    We believe that while the 'dividend yield' concept has merit from a diversification perspective, investors need to explore existing funds in that category before looking at UDY.

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