The UTI MNC Fund is an open ended equity mutual fund that features the stated objective of investing primarily in equity stock and equity derivates of multinational corporations (MNCs). When selecting stocks suitable for its investment objectives, this scheme will not only take into account the global presence of the company but also follow a sector agnostic investment approach to ensure portfolio diversification.
The UTI MNC Fund is an open ended equity mutual fund managed by UTI Mutual Fund AMC, India’s pioneering asset management company (AMC). This mutual fund scheme is targeted at individuals with high risk tolerance and interested in making investments in multinational companies that have operations in India, but generate a significant portion of their revenues from international locations. The following sections will cover some of the key features of this equity mutual fund.
About MNC Funds
MNC Funds are essentially equity mutual funds as they primarily invest in equities and equity derivatives. However MNC funds target their equity investments towards specific companies called multinational corporations. Such corporations are characterized with having significant overseas operations i.e. a significant proportion of the revenues generated by these companies is sourced from overseas destinations. MNCs have to adhere to stringent transparency requirements in order to have operations across multiple international borders, thus MNC Funds are considered by many experts to be potentially less risky investment alternative to thematic funds. Moreover, a majority of MNCs are large companies thus most MNC funds feature a large cap tilt, which can help the fund contain losses even during sustained bear runs.
Risk Level of the UTI MNC Fund
The UTI MNC Fund is mainly invested in equity and equity-derivatives as a result, the investments made by this scheme are prone to the typical risks of equity investments including risk to the principal amount invested in the scheme. Some of these key risks are the risk of illiquidity, volatility risk and market risk. As a result of these as well as other risks that are inherent to this scheme, the UTI MNC Fund is classified as a potentially high risk – high return investment. Therefore it is considered by most analysts to be suitable only for risk tolerant investors.
Risk Mitigation Strategies of UTI MNC Fund
In order to mitigate the key risks inherent to an equity investment, the UTI MNC Fund implements various strategies in order to mitigate the overall portfolio risk. These strategies include:
Sector-agnostic Investments: The UTI MNC Fund follows a sector agnostic investment approach when choosing its investments i.e. the fund does not have overt exposure to a single specific sector of the economy. By avoiding such bias, this mutual fund ensures that exposure to any specific sector is minimised. Thus any and all positive or negative cyclical changes in a specific market segment do not cause high degree of volatility in the fund’s portfolio valuation. This equity mutual fund is thus invested in a wide range of market segments starting from banking and manufacturing to technology and automobiles.
Multi-cap Investments: The problem of equity investments with regards to market risk originates from the fact that the future performance of multinational companies, that the fund is invested in, is not guaranteed. However rule of thumb states that the large-cap investments of the scheme are capable of providing a steady foundation to the fund in the long term, whereas, mid and small cap funds are potentially capable of providing high levels of growth during market bull runs. Historically, the fund has struck a balance and followed a multi-cap investment approach designed to make the best of both large cap as well as mid/small cap investments in order to reduce overall market risk to the portfolio.
Tax Considerations for Investments made in UTI MNC Fund
The UTI MNC Fund primarily invests in equities and equity derivatives of multinational companies that have business interests not just in India but across the world. However, the fund is primarily invested in domestic equities/equity derivatives thus the taxation rules of equity investments apply to all investments made into the UTI MNC Fund. In case of this scheme, fund units that have been held for 1 year or less from the date of unit allotment prior to being redeemed or switched are subject to STCG (short term capital gains). Additionally, if units of the scheme are held for over 1 year from allotment date prior to being switched or redeemed, are subject to long term capital gains (LTCG). As per existing rules, STCG on equities feature a tax rate of 15% which is applicable to only the profits made from the specific investment. At present equity investments in India are completely exempt from LTCG i.e. if the investor redeems or switches units after having held them for 1 year or more, the returns are completely tax free. Any and all dividends earned by the investor while he/she is invested in the fund, are completely tax free for the investor and also not subject to any DDT (dividend distribution tax).
Key Features and Statistics of UTI MNC Fund
Inception: The UTI MNC Fund was first available to individual investors for investment on the 10th of July 1998.
Fund Type: This is an open ended equity fund therefore investors can invest in or switch out/redeem their investment in the scheme at any time of their choice.
Entry Load: In India, fund houses can no longer charge an entry load to investors investing in a scheme for the first time. As a result, the entry load of UTI MNC Fund is currently zero.
Exit Load: The UTI MNC Fund features an exit load of 1% in case of redemptions. However this is applicable only to units that are being redeemed prior to completion of 364 days from the date of unit allocation.
Minimum Investment Amounts: For new investors desirous of investing in this scheme, the minimum lump sum payment requirement is currently fixed at Rs. 5,000. In case of additional investment being made by an existing investor, the minimum lump sum investment amount is currently Rs. 1000. The minimum individual SIP investment amount for new investors is however much lower at Rs. 500. In case of SIP there is an additional requirement that a minimum of 6 investments have to be made into the scheme when setting up the systematic plan.
Fund Manager: The UTI MNC Fund is managed by Mrs. Swati Anil Kulkarni who has been the fund manager for this scheme since August 2005. Before her current assignment as a fund manager with UTI Mutual Fund AMC, Mrs. Kulkarni was employed with Reliance Industries Ltd. She is a B.Com (Honors) graduate and also holds an MBA in Finance from Narsee Monjee Institute of Management Studies in Mumbai. She is also a qualified CAIIB and CFA.
Plans and Options for UTI MNC Fund
The following are the various plans and options available to an investor seeking to invest in the UTI MNC Fund:
Direct Plan: The UTI MNC Fund direct plan is limited by the number of routes through which an investor can access this scheme. Currently, direct plans of mutual funds are available only through the fund house or the RTA but the availability includes both the online and offline mode in case of both routes. Though this scheme variant has a higher unit price as compared to the regular plan of the scheme, some investors favour these due to the low expense ratio. The low expense ratio of direct plans provides this fund variant with the potential to generate higher returns than regular plans in the long term. Direct plan investors have the choice to opt for the growth option as well as dividend option of the scheme.
Regular Plan: In case an investor avails the services of a securities market intermediary such as a brokerage, they will have to opt for the UTI MNC Fund regular plan. This is the most sought after variant of the scheme as this option can be availed through not just the fund house, but also through a variety of intermediaries such as Paisabazaar. Though the regular plan features a higher expense ratio as compared to the direct plan of the same fund, a lower NAV is also on offer to investors. As a result, investors of the regular plan would receive only marginally lower returns in the long term as compared to direct plan investors of the fund.
Growth Option: The UTI MNC Fund growth option is characterized by not making any interim payouts while the investor stays invested in the mutual fund. This is because any profits that the scheme makes through its existing investments is not paid out to the investor, but in fact invested into additional lucrative avenues. This allows the fund to keep increasing its AUM through the years which in turn leads to an increase in the fund’s NAV. Investors buying units at a lower NAV can thus redeem/switch the same units at a higher NAV later on. This allows investors of the growth option to book a profit on their mutual fund investments. Hence this option is ideal for investors seeking capital appreciation of their investments instead of income.
Dividend Option: Dividends are payouts that an investor is liable to receive in case the fund has a distributable surplus available to it as a result of profits that might have been accrued. In case the UTI MNC Fund dividend option declares a dividend, investors receive their pay out on a per unit basis. That said, the dividend is paid out from the current AUM of the fund thus there is a proportional decrease in the NAV of the units. Thus the dividend option of the fund is focused on generating income for the investor, while capital appreciation is only a secondary objective for this scheme variant.
Top Holdings of UTI MNC Fund Portfolio
The following is a list of major investments made by the UTI MNC Fund*.
|Automotive||Maruti Suzuki, Eicher Motors, Bosch, WABCO India, etc.|
|Cement & Construction||Ambuja Cements, ITD Cements, etc.|
|Chemicals and Pharmaceuticals||Castrol, Akzo Nobel, Bayer CropScience, Monosanto India, Sanofi India, GlaxoSmithKline Pharmaceuticals, etc.|
|Consumer Durables/Non-Durables||Whirlpool, Colgate, Gillette India, Hindustan Unilever Limited, Procter & Gamble Hygiene and Healthcare, etc.|
|Engineering and Capital Goods||Grindwell Norton, Schaeffler India, SKF India, Timken, Ingersoll Rand, Igarashi Motors, Cummins India, Siemens, GE Power India, GE T&D India, etc.|
|Food and Beverages||United Spirits, Britannia, GlaxoSmithKline Consumer Healthcare, Nestle India, etc.|
|Information Technology||MphasiS, Oracle Financial Services Software, Polaris Consulting & Services, etc.|
|Others||Kotak Mahindra Bank, Mahindra CIE Automotive, Huhtamaki PPL, Vedanta, CRISIL, Blue Dart, Gujarat Pipavav Port, Honeywell Automation, etc.|
*Equity holdings in the above list have been provides as just an illustrative example and these holdings are liable to change depending on regulations as well as market condition variations.
Investing in UTI MNC Fund through Paisabazaar.com
UTI Mutual Fund AMC is one of the partner fund houses of Paisabazaar.com, thus interested investors can choose to invest in this fund through the easy-to-use mutual fund platform. Unlike many contemporary platforms that still use paper documentation, the Paisabazaar mutual fund platform offers a completely digital way to invest. All the investor needs to do is to sign up for a free investment account and complete the eKYC using the Aadhaar-based online KYC system. Once the account is up and running, choosing and investing in a mutual fund is no different from making online purchases on any shopping website.
Once the investor has made relevant selections regarding growth option or dividend option and lump sum investment or SIP investment, he/she can complete the investment using Netbanking facility of any scheduled bank in India. After the transaction is confirmed, the investor receives the units of the scheme based on the applicable mutual fund NAV depending on the date and time of the transaction. What’s more all services including fund purchase, portfolio management and recommendations offered by Paisabazaar.com are absolutely free so investors can get the best out of all their investments.