AUM: Rs 435.3 crore
Current NAV: Rs 17.90 (Dec 10, ’08)
52-Week High NAV: Rs 22.10 (Jan 7, ’08)
52-Week Low NAV: Rs 17.20 (Oct 27, ’08)
Fund Manager: Amandeep Singh Chopra
THE oldest fund house in the country can be credited for pioneering a pension plan that goes beyond the conventional 100% debt-based investment. Launched in December 1994, this fund is one of the oldest in the category of debt-oriented balanced funds.
Notwithstanding the fact that an average Indian investor seeks safety above all other parameters when it comes to saving for retirement, URBP was launched to provide both safety and returns — through an appropriate mix of equity and debt in the portfolio. Given its equity exposure, one can argue that this fund is slightly riskier than other conventional ‘retirement’ saving products.
However, investors can take relief from the fact that over the long term, it is difficult to lose money in an equity investment. And since this fund is aimed at pensioners, only investors with a horizon of at least 10 years are advised to put money
in this fund.
PORTFOLIO:
URBP’s allocation in debt and equity cannot exceed the ratio of 60:40 respectively. While the fund has often tried to maximise its returns by utilising its equity limit to the fullest, the recent changes in the stock market have forced it to rejig its portfolio.
Its equity composition is down from over 39% in December ’07 to 20% as in November ’08. Nearly two-thirds of its equity portfolio comprises large-cap stocks. Also, the equity portfolio appears to be highly diversified and currently has about 29 scrips.
On the debt front, the fund has exposure in government securities, non-convertible debentures and securitised debt. Since the fund manager is anticipating further reduction in interest rates, the fund has refrained from taking exposure in banks’ certificate of deposits, which are of a shorter duration.
Instead, it has increased investment in securitised debt. Its exposure in these papers has increased from 10% to more than 25% in the past one year. The fund is currently strategising its portfolio in favour of long-term securities to cash in on falling interest rates.
PERFORMANCE:
Since its launch, the fund has generated about 10% CAGR returns , which makes it an average performer among debt hybrid funds. After posting a commendable performance in ’05 with annual returns of about 22%, the fund slipped in ’06, generating just 9%. The average returns of debt hybrid funds were over 13% then.
But URBP managed to improve its performance in ’07, generating an annual return of 22.7% — a tad higher than the category average of 21.2%. URBP has been able to put up a better show in ’08 vis-à-vis its competitor TIPP, but has failed to beat the category average. The fund’s trailing year-to-date returns as on December 11, ’08 stood at -17 .5%, against the category average of -10 .7%.
INVESTORS’ DIGEST:
Investors who want to invest in mutual funds only to generate quick and high returns should keep away from this fund. URBP is meant only for those seeking some income, post retirement. Since the scheme targets only long-term investors, its exit load structure is designed to deter investors from redeeming their investments earlier.
Thus, exiting from the scheme within one year of investment will call for an exit load of 5%, redemption within 1-3 years from the date of investment will attract an exit load of 3%, while redemption after three years will attract a uniform exit load of 1%. The exit load is waived only if an investor redeems the investment after maturity, i.e. after attaining 58 years of age.
While most long-term funds declare regular dividends to give periodic sums of money to their investors, URBP instead declares bonuses. This is done with an intention to save on dividend distribution tax. The fund has declared bonuses in the past at intervals of a little over a year, but is yet to declare bonus for the current financial year. Investment in this scheme is also eligible for tax deduction up to Rs 1 lakh under Section 80C of the Income Tax Act.
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