Kochi: The UTI fund has delivered an average return of 6.47 per cent (rolling returns) on six months daily basis under its regular-growth option (data period: October 2014 to October 2019). During the same period, the fund has generated a return in the range of 4.95 per cent (minimum) to 9.37 per cent (maximum) on 6 months daily rolling basis without any instances of negative returns. On compounded annual growth basis, the fund has delivered a return of 6.4 per cent under its regular plan and 6.92 per cent under its direct plan on 1-year basis.
The fund has exhibited decent performance besides paying monthly dividends under its regular and direct plans. The fund being equity-oriented enjoys certain tax arbitrage (in respect of capital gains tax and dividend distribution) compared to other debt investment avenues. The fund has a reasonable track record of monthly dividend distribution. The periodic income in the form of dividends can help investors plan out their finances in a holistic manner. The NAV appreciation in addition to this adds to overall return.
UTI Arbitrage Fund is one among the early generation of arbitrage funds which was launched in 2006 and now has a 13-year track record spanning across different market cycles.
Investors may use arbitrage funds to park their short-term surplus aiming capital appreciation with minimal risk, periodic income, and tax arbitrage. The fully hedged equity portfolio looks out for better arbitrage opportunities and keeps the risk of any directional equity calls away.
In the current market environment where there is higher risk aversion on account of credit issues & market volatility, arbitrage funds can provide a relatively safer investment avenue for short term parking of funds. The fully hedged equity portfolio takes the worry off for the investor and targets higher yield from arbitrage opportunities. On the debt side, the fund manager focuses on quality debt instruments (such as AAA, A1+) with a low duration of 175-250 days.