Flexi-cap funds are open-ended equity funds investing at least 65% of total assets are invested in equity assets of companies across the different market capitalizations viz., large-cap, mid-cap or small-cap funds. UTI Flexi Cap Fund is one of the oldest funds in the category (launched in 1992) and has a long-term track record of consistent performance. The Fund completed 30 years of wealth creation in May 2022 and has successfully weathered market storms since 1992. The Fund has a corpus of around Rs. 26,130 crores and is trusted by over 18.88 lakh investors (as on October 31, 2022). This offering from UTI Mutual Fund is suitable for any long-term investor looking for a fund that endeavours to invest in quality businesses that have the potential for creating economic value for investors.
UTI Flexi Cap Fund’s investment philosophy is built around the three pillars of Quality, Growth and Valuation. The portfolio strategy would be to focus on businesses that have the ability to show strong growth for a long period of time and are run by seasoned management.
“Quality” signifies the ability of a business to sustain a high Return on Capital Employed (RoCE) or Return on Equity (RoE) over a long period of time. Truly high-quality businesses are those that are able to generate high RoCEs and also RoEs even during difficult times for their respective industries or sectors and therefore operate above their cost of capital at all times.
“Growth” on the other hand signifies long-term secular growth for the business. The fund emphasizes businesses that have steady and predictable growth trajectories rather than cyclical and volatile growth. Cyclical growth or de-growth can be very sharp and unpredictable and can surprise investors in either direction, as against secular growth where there is relatively more certainty in understanding the long-term drivers and hence future outcomes.
The last pillar of the fund’s investment philosophy is “Valuations”. Valuations are an important metric as an entry point into a great business and therefore one should very carefully study this before entering a stock. The Price to Earnings (P/E) is merely a shorthand metric for the firm’s cash flow generation and value creation potential over a long period. More often than not, a high RoCE and high growth business creates more value over the long-term and would hence mathematically deserve a higher P/E.
The Fund invests across the market capitalization spectrum following the “Growth” style of investment. The scheme’s top ten holding consists of ICICI Bank Ltd., Bajaj Finance Ltd., Infosys Ltd., HDFC Bank Ltd., Kotak Mahindra Bank Ltd., L&T Infotech Ltd., Avenue Supermarts Ltd., Info-Edge (India) Ltd., HDFC Ltd. and Mindtree Ltd. and which accounts for around 41% of the portfolio’s corpus as of October 31, 2022.
UTI Flexi Cap Fund is suitable for those equity investors looking to build their “core” equity portfolio and seeking long-term capital growth through investment in quality businesses that generate economic value. Investors with a moderate risk profile and looking to invest for at least 5 to 7 years to meet a long-term financial goal, may consider investing in this fund.