UTI Mutual Fund has launched UTI Wealth Builder Fund, a 5-year close-ended plain vanilla fund with an inbuilt hedging option whereby, depending on the index level, a certain percentage of the portfolio will be hedged through derivatives.
Experts believe that the performance of the fund will depend on the capability of the fund manager in making the right calls.
Investment expert Sandeep Shanbhag says, "Being close-ended, the fund manager is allowed to manage the money in a much better way as it remains locked in and hence he can take long-term calls. But, the performance of the fund will basically boil down to the competence of the fund manager in making the right calls. Also, since the fund plans to partially hedge its portfolio, it becomes critical for the fund manager to decide which stock to hedge and which not to."
On the flipside, investment advisor Hemant Rustagi warns, "The fund being a closed ended, one aims to provide investors with the benefits of long term equity investing. This by itself does not guarantee better performance than the on-going open-ended funds." "Besides, the existing funds provide investors with multiple options in terms of different investment strategies and track record", he adds.
A section of the media has pointed out that there are no new features in UTI Wealth Builder Fund except that it is close ended. However, Shanbhag says, "The simpler the mutual fund product, the better it is. This should not be a factor in the decision making. The performance of the fund will solely depend on the quality of the fund management team and only time will tell whether UTI Wealth Builder lives up to its name or not."
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