Not dependent on sectoral allocation, says UTI AMC’s Vetri Subramaniam on equity fund NFO

The bull run in the equity market and heightened retail interest has led to a flurry of NFOs from the mutual fund fraternity. Mutual funds have raised over Rs 53,700 crores via the NFO route in 2020

Vetri Subramaniam, CIO, UTI AMC spoke to CNBC-TV18 and discussed their own focused equity fund NFO.

On allocation strategy, Subramaniam said, “While there is a sort of template that we have out in terms of a model portfolio for the fund, I would essentially say that it is a completely bottom-up oriented thought process.”

He elaborated by saying, “The strategy is going to be run by Sudhanshu Asthana who joined us about four months ago. He has got a background and a track record in which he has been significantly involved in managing these kinds of focus strategies, both on the mutual fund side as well as on the PMS side. Our preference for this was to go completely bottom-up, not to sort of be driven by any sectoral allocation rules. So, sectoral allocation is an outcome we don't want the fund to get too concentrated in a particular sector because we have already concentrated it in terms of the number of stocks in the portfolio. We tend to keep it diversified across sectors,"

“From a market cap perspective, we think the ideal operating range for the portfolio would be about 60 to 70 percent in large-cap stocks and the remainder being in mid and small-cap stocks. But there is no thematic or sectoral bias built into the portfolio. The sectoral allocations are the outcome of the bottom of stock picking,” he said.

On market, Subramaniam said, “I don't think surfing the waves is something that we would recommend to people who should be looking at equities as a way to achieve their financial goals. I think most importantly, the guideposts that people need to use are their own asset allocation mix and the relevance of that asset allocation mix to their long-term financial goals."

“Participating in the markets, because they have done well over the last one month, two months, three months is not a good reason to necessarily jump in and say that I will allocate more. The only basis on which asset allocation decision should always be ordered is one, where are we in terms of valuations, is it a favourable point in terms of valuations to raise allocations to a particular equity class?” he added.