UTI Short Term Income Fund - Rating & Review - Consistent Performer with Quality

UTI Short Term Income Fund – Rating & Review – Consistent Performer with Quality

Roboadviso     Mutual Funds Rating     Posted On, Sat 22nd July, 2017     No comments
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UTI Short Term Income Fund Rating Review

UTI Short Term Income Fund is a scheme which aims to create reasonable and stable income, with high liquidity levels and reduced risk via a portfolio comprising of money market instruments and high end debt instruments with up to four years maturity.

Presented below is a comprehensive review of this fund which will provide you with all the required information that you need to make a better choice about whether to buy, sell, or hold this fund.

Basic costs and other information

UTI Short Term Income Fund was launched on August 28, 2007. Thus, the fund has been in the investment market for nearly a decade and remained a successful scheme. As of June 30, 2017, this debt-focused fund has assets of INR 9,988 crores. The minimum required investment for lump sum investment route is INR 10,000, while the Minimum SWP Withdrawal is 1,000.

The expense ratio as of 31st May 2017 is 0.86 percent. There is no exit load, i.e., it is zero percent.

Sudhir Agrawal has been the fund manager of UTI Short Term Income Fund since July 2012. He holds an M.Com degree and a PGDBA in Finance and is also a CFA. Before managing UTI Short Term Income Fund, Mr. Agrawal has worked for Tramp Value Pvt. Ltd., TATA Asset Management Ltd., and CARE Ratings.

Other funds managed by him include UTI Floating Rate Short Term Fund – Regular Plan; UTI Banking & PSU Debt Fund – Regular Plan; and UTI Treasury Advantage Fund – Institutional Plan.

Allocation of the fund

As of 31st May 2017, the fund’s allocation stands as 66.72 percent in debt, 16.70% in Cash/Call, and 16.56% in money market. The portfolio mainly focuses on Debenture (32.63%), Bonds (23.33%), GOI Securities (14.81%), State Development Loan (7.57%), and Non Convertible Debenture (7.53%).

As of 31st May 2017, the top 6 instruments that make up the fund portfolio include GOI 2029-GOI Securities (6.31%), HDFC 2020-Debenture (4.52%), GOI 2020-GOI Securities (3.99%), SIDBI 2020-Bonds (3.76%), GOI 2027-GOI Securities (3.73%), and Power Finance Corp. 2019-Bonds/Debentures (3.59%).

Performance

As of July 14, 2017, UTI Short Term Income Fund has produced a 9.55 percent return per annum on investment in the last 5-year period. This shows that the fund beat the category average of 8.84 percent for the same period. From the time of launch the fund has delivered 9.15 percent per annum returns.

In the past 1 and 3 years period, the fund has shown 9.13, and 9.22 percent returns. Thus the outperformance margins of the fund vis-à-vis the category, on 3 and 1 year periods, are marginally better.

As per data of the past 3 years, the fund’s standard deviation, i.e., the volatility of the returns of the fund vis-à-vis its average, is 1.52% as of 30th June 2017. This is higher than the category average which is 1.43% for the same period. 

When the returns of UTI Short Term Income Fund are compared with its peers during the past 5 year period, then at 9.55 percent returns it has performed slightly better than other similar funds like Baroda Pioneer Short Term Bond Fund (8.97%), BOI AXA Short Term Income Fund – Regular Plan (8.62%), Escorts Short Term Debt Fund (8.50%), and HDFC Short Term Opportunities Fund (9.07%).

Analysis

The UTI Short Term Income Fund is a fund which has continuously managed to generate CAGR of almost 9.5 percent over the period of the last five years. The fund is well known for its use of a perfect mix of corporate and sovereign bonds to earn good returns over the short term.

Many market experts consider the fund to be one of the most conservative ones in its category with regards to taking on increased credit risk. This is primarily because almost 90 percent of the portfolio consists of AAA or A1+ corporate bonds and G-secs or government securities. The fund does not park its investment in any corporate bond that does not have rating of AA or above; this ensures better and steady returns with least risk. The fund does take on some limited exposure to G-secs of long duration so as to gain from the rate falls. The portfolio investments have had an average maturity level of 3 to 4 years on certain occasions, but by the end of April 2016, it stood firm at the moderate maturity of 2.2 years. All these points are indicative of the fact that the fund takes risks only to some degree.

Should I sell, buy, or hold?

UTI Short Term Income Fund offers increased payoffs relative to the amount of risks involved. It has shown consistent and strong performance for the past many years, which makes it one of the top leaders within its category. We give it our approval and our suggestion to all investors is – “Buy.”

Pros

Excellent Fund Manager
Excellent Fund House
Excellent Performance
Excellent Consistency
Excellent Fund Size
Low Expense Ratio

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