UTI Focused Equity fund NFO launched

UTI Mutual Fund is coming out with a NFO in the form of UTI Focused Equity Fund.

UTI Focused Equity Fund would be an open ended focused fund investing in a maximum of 30 stocks.

The fund would be open for subscription from August 04, 2021 to August 18, 2021.

NFO details for UTI Focused Equity Fund

Scheme Opens	04/08/2021
Scheme Closes	18/08/2021
Fund Manager	Mr. Sudhanshu Asthana
Benchmark	Nifty 500 TRI
Minimum Investment	5,000
Fund Category	Flexi Cap
Exit Load	1% if redeemed/switched within 12 months. Nil if redeemed/switched after 12 months

UTI Focused Equity Fund would be an open – ended focused equity fund with freedom to invest across large, mid and small cap stocks restricted to maximum of 30 stocks.

The scheme would reopen for investment from 26^th August 2021.

Additional reading: Click Here to read everything you ever wanted to know about a NFO mutual fund

UTI Focused Equity Fund Investment Objectives

The investment objective of the fund is to generate long term growth while identifying and investing in equity and equity related instruments of maximum 30 stocks across all market caps.

There is no guarantee that the investment objectives of the scheme would be achieved.

UTI Focused Equity Fund Allocation

The asset allocation for the fund would be something like this

Asset Class	Minimum %	Maximum %
Equity and Equity Related instruments (Maximum 30 stocks)	65	100
Debt and money market securities including securitized debt	0	25
Units issues by REITS and InvITs	0	10

The above figures are only indicative and not fixed, the fund managers have the liberty to move across the asset classes depending upon prevailing market conditions as long as they remain within the mandate permitted.

The fund can also invest in REITs and InvITs if so desired.

Who should invest in UTI Focused Equity Fund?

Investors who are looking:

For a highly concentrated and a high conviction fund.

For long term wealth creation.

Additional reading: Click Here to read our complete review of Edelweiss Recently Listed IPO Fund

Features of UTI Focused Equity fund

The fund will implement a top down and bottom up approach.

The fund will be biased towards companies with a high ROCE.

The fund will be agnostic to market capitalization but would be biased towards large cap stocks.

There would be a single stock limit of 9.50%.

There would be no sector limit though.

The fund would have a concentrated portfolio with possibility of a high turnover due to high conviction.

Example of Top Down and Bottom up approach

Top Down	Bottom Up
Economic Indicators	Valuations
Global factors	Management
Inflation	Historic return ratios
Future earnings potential	Growth

UTI Focused Equity Fund Investment style

The fund would follow a blend of growth and value style.

The fund would be actively managed.

The fund would be on the lookout for businesses which project long term stability.

The core of the portfolio would invest in companies with long term sustainable growth.

Since the investment style would be a mix of growth and value style, the fund would occasionally pick companies going through a cycle and available at an attractive valuation.

The fund would avoid companies:

That have management and minority shareholder issues.

Companies with high debt.

Companies with inconsistent cash flows.

Companies with inferior ROCE (return on capital employed) and long term sustainability.

What is a Focused fund?

Focused mutual funds have a concentrated portfolio and do not invest in more than 30 stocks.

There are less diversified than flexi cap mutual funds but also have more potential for higher returns.

Despite the limitation of 30 stocks, certain focused mutual funds invest in even fewer stocks than that.

Invesco Focused fund invests in only 20 stocks whereas Axis Focused fund invests in only 25 stocks.

Funds besides focused funds also at times apply this investment strategy even though there are under no obligation to.

These include the following but not limited to these:

Axis Flexi cap fund

Axis Bluechip fund

Parag Parikh flexi cap fund

Parag Parikh tax saver fund

How does Focused investing work?

Focused investing means a highly concentrated portfolio.

This leaves less room for diversification since the number of stocks are limited.

Funds can also limit the maximum exposure to a particular stock.

This is because the number of stocks is limited so as it is exposure of each stock will also be on the higher side compared to any diversified equity fund.

On top of that increasing the already higher exposure of a particular stock can invite trouble.

Who can invest in UTI Focused Equity Fund?

The following persons are eligible and may apply for Subscription to the Unit(s) of the Scheme:

Resident adult individuals either singly or jointly (not exceeding three) or on an Anyone or Survivor basis;

Minor (as the first and the sole holder only) through a natural guardian (i.e. father or mother, as the case may be) or a court appointed legal guardian. There shall not be any joint holding with minor investments;

Non-Resident Indians (NRIs) / Persons of Indian origin (PIOs) / Overseas Citizen of India (OCI) residing abroad on repatriation basis or on non-repatriation basis;

Such other category of person(s) permitted to make investments and as may be specified by the AMC / Trustee from time to time.

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Mutual Fund investments are subject to market risks. Please read the offer document carefully before investing