UTI Equity Fund Follows A Bottom-Up Philosophy: Ajay Tyagi

According to Mr. Ajay Tyagi, EVP & Fund Manager, UTI AMC, the relentless focus on being bottom-up in their approach and taking a view on businesses from a longer-term perspective, rather than being driven by narratives around which sectors may or may not do well over the next few quarters has helped UTI Equity Fund outperform in its category and beat the benchmark by a wide margin. It is precisely because of this reason that UTI has stayed bullish on their holdings in the IT and pharma sectors and they have been suitably rewarded over the last six months. Mr. Tyagi feels that once deep fundamental research is done on businesses, one must hold onto them patiently with conviction in order to generate sustainable alpha.

UTI Equity Fund follows a bottom-up philosophy and the sectoral weightages are therefore an outcome of the stock selection rather than any view on sectors. Mr. Tyagi prefers businesses that have the ability to create economic value by the way of generating high ROCEs and high cash flows. Given this prerequisite, most of the investments fall into sectors like consumer goods, IT, pharma, private-sector banks and auto. Equally, businesses that lack these characteristics are the ones where we don’t make any investments. That is precisely why the fund doesn’t have investments in sectors like metals, oil and gas, utilities, real estate and infrastructure as it is difficult to find businesses with strong economic characteristics in these sectors. Across time periods, people would find the fund being bullish on the former and bearish on the latter.

UTI Equity fund is a multi-cap fund and is truly agnostic towards investing in large, mid or small caps. The fund does not take a call on which market-cap bucket will do well over the next few quarters but true to its philosophy, it builds exposure in the best businesses across market-cap buckets. Like the sectoral exposure, the market-cap exposure of the fund is also an outcome based on our stock selection. Having said that, over the years, Mr. Tyagi said, “we have seen that our exposure to mid and small caps has been between 30–40 per cent and it should remain in the same ballpark in the foreseeable future as well.”