Uti Mnc Fund: Is It Worth Your Investment?

The UTI MNC Fund is a mutual fund that predominantly invests in multinational corporations (MNCs). It was launched in July 1998 and has an expense ratio of 1.43% for the direct plan. The fund has consistently underperformed the Nifty MNC index and, as of September 2024, has an annual fee of 1.98% to 2%. The UTI MNC Fund may be a good investment option for investors seeking higher returns, but it is important to note that thematic funds like this come with greater risk than diversified funds.

UTI MNC Fund's performance compared to Nifty 50 and Nifty MNC

The UTI MNC Fund has been compared to the Nifty 50 and Nifty MNC indices, as well as the ABSL MNC Fund and the SBI Global MNC Fund. The UTI MNC Fund was launched in July 1998 and has an expense ratio of 1.43% for the direct plan. It has an average performance among its peers, with an AUM of 2092 crores.

When compared to the Nifty 50 and Nifty MNC indices over a 5-year period, the UTI MNC Fund has comfortably beaten the Nifty 50 and has kept pace with or outperformed the Nifty MNC Index. However, the 3-year data shows that the UTI MNC Fund has underperformed the Nifty MNC Index, with only the ABSL MNC Fund outperforming the Nifty 50 in this period.

The UTI MNC Fund has produced similar returns to the ABSL MNC Fund, with the latter producing slightly higher returns at a slightly higher risk. The UTI MNC Fund has a higher expense ratio than the ABSL MNC Fund (1.43% vs. 1.2%).

Overall, the UTI MNC Fund has shown average performance when compared to the Nifty 50 and Nifty MNC indices, and its performance is similar to that of the ABSL MNC Fund.

The pros and cons of investing in MNC funds

Multinational corporations (MNCs) are typically well-established companies with strong balance sheets and significant competitive advantages. They have proven business models that have been tested across several countries, allowing them to gain valuable experience and mitigate risks. Investing in MNC funds can offer individuals exposure to these companies and the potential for sound returns. However, there are also some disadvantages to consider before investing in MNC funds.

Pros:

• Tried and tested investment model: MNCs have well-established business models that have been proven successful in multiple markets. They have a competitive advantage due to their access to superior technology, innovative processes, and financial resources provided by their global parents.
• Efficient ecosystem: While operating in the domestic market, MNCs develop a network of suppliers and vendors. They then leverage cost efficiencies to enter export markets, boosting their earnings.
• Stable and less risky: MNCs tend to be less volatile and less risky compared to other thematic mutual funds. They are often cash-rich, enabling them to survive adverse times, and they adhere to high standards of corporate governance.
• Sound risk-adjusted returns: MNC funds can provide sound risk-adjusted returns. For example, the UTI MNC Fund has a relatively low beta of 4.56 and a standard deviation of only 11 per cent.
• Geographical diversification: By investing in MNCs, investors can gain geographical diversification as these companies operate in multiple countries.

Cons:

• Limited stock universe: A key challenge for MNC fund managers is the limited universe of stocks available to them. For example, as the economy recovers, the banking and financial services sector is expected to perform well, but there are very few MNC stocks in this area.
• Valuation risk: Most MNC stocks are currently trading at high valuations due to their cash-rich status and sectors like FMCG.
• Duplication: Your diversified equity funds may already include many MNC stocks, so investing separately in MNC funds may result in duplication.
• High royalty payments: Occasionally, high royalty payments to parent companies can affect the earnings of MNCs in the short term.
• Sector concentration: The limited number of MNCs results in sector concentration in these funds, mainly in fast-moving consumer goods (FMCG), automobiles, and auto components. This means that investors' returns are heavily influenced by the performance of these sectors.
• Performance: While MNC funds have delivered positive long-term performance, they have underperformed compared to average flexi-cap funds over the last three, five, and seven years.

In conclusion, while MNC funds offer the potential for stable, risk-adjusted returns and geographical diversification, they also come with certain drawbacks. It is essential to carefully consider these pros and cons before deciding whether to include MNC funds in your investment portfolio.

The expense ratio of UTI MNC Fund

The expense ratio of the UTI MNC Fund is an important factor to consider when deciding whether to invest in this mutual fund. The expense ratio represents the annual fees that investors are charged for the management of their money, and it is typically deducted from the Net Asset Value (NAV) on a daily basis.

The expense ratio of the UTI MNC Fund varies depending on the source of information and the date of reporting. Here are a few values mentioned in different sources:

• 1.17% (as of September 30, 2024, for the direct plan)
• 1.43% (direct plan, as of October 1, 2023)
• 2.00% (UTI MNC Fund Regular Plan Growth)
• 2.05% (regular plan, as of August 19, 2023)
• 2% (as of October 18, 2024)

It is important to note that the expense ratio for regular funds is generally higher than that of direct funds due to the commission paid to brokers or distributors. Therefore, direct funds tend to offer higher returns to investors due to their lower expense ratios.

The suitability of UTI MNC Fund for investors

Risk and Returns

UTI MNC Fund is a sectoral/thematic mutual fund that invests primarily in domestic equities of multinational corporations (MNCs). As of August 2024, the fund had approximately 94-96% of its portfolio invested in equities, with a breakdown of 35-38% in large-cap stocks, 23-24% in mid-cap stocks, and 18-19% in small-cap stocks. The fund also has a small allocation of 0.47% in debt instruments, specifically government securities.

The fund's performance has been average among its peers, with a moderate to high risk of negative returns. It is important to note that thematic funds like UTI MNC Fund carry greater risk than diversified funds due to their focus on a specific sector. Unforeseen events like war, sanctions, or regulations can disproportionately affect these funds.

Investment Goals

The UTI MNC Fund is suitable for investors who seek higher returns compared to other equity funds and are willing to take on the associated risks. The fund targets investors with advanced knowledge of macro trends and a preference for selective bets.

Expense Ratio

The expense ratio of the UTI MNC Fund is around 1.98-2.00%, which is slightly above the category average of 1.17-2.06%. The expense ratio represents the annual fees charged by the fund for managing your investment.

Fund Size

As of August 2024, the fund size was approximately ₹3206.2 Cr, which is 0.7-0.77% of the investment in its category. While a smaller fund size may impact the resources available for research and management, it also allows the fund to be more agile in placing investments.

In conclusion, the UTI MNC Fund is suitable for investors with a good understanding of market trends, a higher risk tolerance, and a goal of achieving potentially higher returns by investing in multinational corporations. However, investors should carefully consider the risks associated with thematic funds and ensure they have a well-diversified portfolio to mitigate potential losses.

The historical performance of UTI MNC Fund

The UTI MNC Fund was launched in July 1998 and has an expense ratio of 1.43% for the direct plan. The fund has a history of investing predominantly in domestic equities, with a small portion in debt and government securities. As of August 2024, the fund had approximately 94-96% of its investments in domestic equities, including large, mid, and small-cap stocks. The remaining 0.47% was invested in debt, with a focus on government securities.

In terms of historical performance, the UTI MNC Fund has shown average performance when compared to its peers. As of October 2024, the fund size was approximately ₹3248.95 Cr, which represents 0.7% of the investment in its category. The fund's Net Asset Value (NAV) has fluctuated over time, with recent data showing a decrease of 1.49% as of October 17, 2024, and a slight increase of 0.05% on August 26, 2024.

The fund's performance has been mixed when compared to other indices and mutual funds. While it has outperformed the Nifty 50 at a lower or comparable risk over a 5-year period, it has underperformed the Nifty MNC Index and the ABSL MNC Fund over a 3-year period.

Overall, the UTI MNC Fund has shown average historical performance, with fluctuations in its Net Asset Value and mixed results when compared to other funds and indices.

Frequently asked questions