Setting realistic financial goals is crucial for successful investing. Understanding the risk associated with an investment option is essential for optimal long-term outcomes. Mutual fund options can be explored to meet short-term and long-term financial goals. One mutual fund product category for long-term wealth creation is flexi-cap funds, which invest at least 65% of total assets in equity assets of companies across different market capitalizations. UTI Mutual Fund’s Flexi Cap Fund, one of the oldest in the category, has a long-term track record of consistent performance and a corpus of over Rs. 25,452 crores. This offering is suitable for long-term investors seeking quality businesses with potential to create economic value.
UTI Flexi Cap Fund’s investment philosophy is based on three pillars: Quality, Growth, and Valuation. Quality refers to a business’s ability to sustain high Return on Capital Employed (RoCE) or Return on Equity (RoE) over time, even during challenging times. High quality businesses generate strong cash flows, which create economic value. Growth, on the other hand, signifies long-term secular growth, with a steady and predictable trajectory. The fund prefers businesses with a steady and predictable growth trajectory, as cyclical growth can be unpredictable and surprise investors. High quality businesses create economic value, while high growth businesses enable compounding of this value.
The last Pillar, Valuations, which is an important metric for investors, and the Price to Earnings (P/E) multiple is a widely misunderstood technique. A high RoCE and high growth business creates more value over the long term and should be considered for long-term investors. Before judging a business based solely on P/Es, it is crucial to study the characteristics of each business and establish a fair valuation band. The P/E should be considered in the context of RoCE, opportunity to reinvest, and free cash flow.The UTI Flexi Cap Fund, a growth-oriented equity fund, invests across market capitalization with top ten holdings like HDFC Bank, LTIMindtree, Bajaj Finance, ICICI Bank, Infosys, Avenue Supermarts, Kotak Mahindra Bank, Info-Edge (India), Coforge, and Titan Co. Ltd. These companies make up around 45% of the portfolio’s corpus as of September 30, 2023.
