Frequently Asked Questions

Frequently Asked Questions
What is an ideal way of wealth creation?
Mostly people invest in those assets which are expected to do well in coming years. If
some of those investments do not make money, they may sell them and invest in other
assets. This is quite a familiar one but not a scientific one. There are no definitive guidelines
for what to buy or when to buy it, and there is no mention of risk management or risk
control. In addition, making money is not quantifiable as we do not have a nest egg as
target to enable us to evaluate whether we have achieved our target or not. Investors
may claim that they have an investment plan in place, though the portfolio will be
composed of randomly selected investments and residual bits and pieces of securities
that were once part of portfolio, without complementing each other.
The sensible option is to Buy and hold a well-diversified portfolio of low cost investments
that match one's long-term financial needs and are within one's tolerance for risk.
How does the Multi Asset Allocation Fund optimise one's investment portfolio ?
Though each individual asset class has its own importance in a portfolio, a multi asset
allocation can optimize for the investor in the following way,
-
Providing access to a greater investment universe
-
Minimizing overall risk of portfolio
-
Removing emotional biases
-
Helping stay focussed to long term goals
What is UTI Multi Factor Model and how does it work ?
UTI multi factor model helps determine the exposure into equity assets of the Fund in
alignment with Asset Allocation Committee’s overlay decision or thought process.
The broad framework of the model is mentioned as below:
1.
58 single factors to evaluate the universe
2.
These factors are then categorised into 4 broad groups such as Value, Momentum,
Quality, Earnings & Sentiment.
For internal circulation only.
3.
Some of the factors are then selected out of the overall universe periodically basis
their relevance (11 factors were selected in the month of May16). However, the
selection of factors is dynamic and may change periodically basis the relevance.
4.
Each broad factor has its weightage basis which stocks (S&P BSE 200 index) are
ranked and categorised into 5 buckets based on their attractiveness (Bucket 1
being the most attractive and Bucket 5 being the least attractive)
Bucket 1
20 stocks
5.
Bucket 2
53 stocks
Bucket 4
54 stocks
The buckets based on pre defined trigger limits (as given below)
BUY/SELL signal on periodical basis.
BUY EQUITY
6.
Bucket 3
54 stocks
Bucket 5
20 stocks
throws out the
SELL EQUITY
Buckets
B1 + B2
B1
Index Weight
>= 50%
>=20%
Buckets
B3 + B4
Index Weight
>=50%
B3
>=30%
B2
>=30%
B4
>=20%
Once, the output is provided by the model on increasing or reducing equity
exposure, basis which the fund manager at his discretion or in consultation with Asset
Allocation Committee would rebalance the allocation.
However, the model is limited to determine about the level of exposure into Equity
and does not play any role in determining the exposure into arbitrage, debt, liquid &
Gold.
How a model based approach helps in asset allocation of a portfolio ?
A model based asset allocation fund helps in multiple ways such as
-
Model decides allocation to a particular asset class
-
Model decides when to increase and decrease allocation to a particular
asset class (
)
-
Model cuts the emotional biases
-
Model brings operational efficiency
For internal circulation only.
What will be the portfolio construct and the investment philosophy (going forward) of the
fund ?
The allocation construct would be as under:
Instrument
Equity & Arbitrage
Debt & Liquid
Gold
Allocation
65% - 100%
0% - 35%
0% - 35%
Risk Profile
High risk
Low to Medium risk
High Risk
Key feature
Tax efficiency
Stability
Investment philosophy of the fund :
For Equity: The fund manager will pursue a fundamental driven portfolio construction
approach with a multi cap style. The number of stock would be around 50 and the core
positions will be on index blue-chips. The arbitrage positions will primarily be in mid caps in
F&O segment.
For Fixed Income: The fund manager focus will be on accrual strategy with a limited
duration calls based on in-house views. The debt portfolio will have securities across
maturity spectrum and would preference for quality credit papers.
For Gold: The allocation to gold will be moderate and calls will be based on extreme
volatility
What are the 58 factors considered in the model to determine the ranking of stocks ?
Mentioned below are the 58 factors considered in ranking the S&P BSE 200 stocks :
Value
Quality
1. Historical Price to Earnings Ratio
(PE)
2. Historical Price to Sales Ratio (PS)
3. Historical Price to Book Value (PB)
4. Historical Dividend Yield (DY)
5. Historical Debt To Equity (DTTE)
6. FY1 Forward Price to Earnings
(FY1PE)
7. FY2 Forward Price to Earnings
(FY2PE)
8. FY1 Forward Price to Book (FY1PB)
9. FY2 Forward Price to Book (FY2PB)
10. Ratio of PE to prior 6 m average
PE
11. Ratio of FY1PE to prior 6 m
average FY1PE
For internal circulation only.
1.
2.
3.
4.
5.
6.
7.
8.
Earnings Risk FY1
Earnings Risk FY2
Historical Return of Equity (ROE)
Historical Return on Capital (ROC)
ROC 1yr Change
ROE 1yr Change
ROC 6m Change
ROE 6m Change
12. Ratio of FY2PE to prior 6 m
average FY2PE
13. Ratio of PB to prior 6 m average
PB
14. Ratio of FY1PB to prior 6 m
average FY1PB
15. Ratio of FY2PB to prior 6 m
average FY2PB
16. Ratio of PS to prior 6 m average
PS
17. Ratio of PE to prior 1 yr average
PE
18. Ratio of FY1PE to prior 1 yr
average FY1PE
19. Ratio of FY2PE to prior 1 yr
average FY2PE
20. Ratio of PB to prior 1 yr average
PB
21. Ratio of FY1PB to prior 1 yr
average FY1PB
22. Ratio of FY2PB to prior 1 yr
average FY2PB
23. Ratio of PS to prior 1 yr average
PS
Momentum
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
3m Price Momentum
6m Price Momentum
9m Price Momentum
12m Price Momentum
1m Price Momentum
1w Price Momentum
2w Price Momentum
9D RSI
1w Price Reversion
1m Price Reversion
2w Price Reversion
For internal circulation only.
Earnings and Sentiment
1.
2.
3.
4.
5.
6.
7.
8.
9.
10.
11.
12.
13.
14.
15.
16.
Historical Earning Growth (EG)
ANR
1m Change ANR
3m Change ANR
1w Change ANR
2w Change ANR
FY2 EPS 1m momentum
FY2 EPS 1w momentum
FY2 EPS 2w momentum
FY1 EPS 1m momentum
FY1 EPS 1w Momentum
FY1 EPS 2w Momentum
1m Target Price Momentum
1w Target Price Momentum
2w Target Price Momentum
3m Target Price Momentum
How UTI Wealth Builder Fund is a "complete investment solution”?
One of the core characteristics of a complete investment solution is that it takes care of
long term investment goals during one’s life cycle. It helps build long term wealth within
the risk- return profile of investor in a tax friendly manner. UTI Wealth Builder is one such
fund that meets this objective with its portfolio design and management style. The fund
packs in it, the growth potential, stability factor, risk management mechanism with added
advantage of tax applicable to an equity fund.
Will UTI Wealth Builder maintain its characteristic of an equity fund ?
Yes. The UTI Wealth Builder Fund will maintain atleast 65% of allocation in equity and equity
related instruments (derivative etc) essential to be classified as an equity fund for tax
purposes.
How UTI Wealth Builder Fund is different from other balanced & balanced arbitrage funds
in the industry ?
Some of the key feature differentiates UTI Wealth Builder Fund from the existing Balanced
and Balanced arbitrage funds in the industry.
Investment
Model
Asset Allocation
UTI Wealth Builder Fund
Existing Balanced
Funds
Existing Balanced
Advantage
/Arbitrage Funds
Dynamic Multi Factor
Model
Static equity
allocation of
around
65% - 75% Not
much use of
derivatives.
single/two factor
model





For internal circulation only.
Equity
Derivatives
Debt
Liquid
Gold



Equity
Debt
Liquid




Equity
Derivatives
Debt
Liquid
 Tax efficient
Tax Efficiency
 Tax-free dividends,
no dividend
distribution tax and
no long term capital
gains
 Tax efficiency of
equity to investment
in gold also
For internal circulation only.
 Tax efficient
 Tax efficient
 Tax-free
dividends, no
dividend
distribution tax
and no long
term capital
gains
 Tax-free dividends,
no dividend
distribution tax and
no long term
capital gains