UTI Credit Opportunities Fund

I’m really late writing about UTI Credit Opportunities Fund because the NFO ends today, but I’m hoping that this post will still be useful for people who are interested in investing in the fund after the NFO.

This is a debt fund, and the interesting thing about this debt fund is that they may invest up to 50% of their funds in debt of less than AA rating because debt with a relatively lower rating usually has a higher coupon rate.

This is an actively managed fund which means the fund managers will look for good opportunities and mis-pricings in the market in order to discover money making opportunities.

There are two fund managers, Mr. Amandeep S Chopra who is 41 and manages or co-manages several other funds in UTI and Mr. Arpit Kapoor, who is 28, and the SID says he is the dedicated fund manager for investment in ADRs/GDRs/Foreign securities of all domestic schemes launched or to be launched by the UTI Mutual Fund.

So the idea behind the fund is that these two fund managers actively managing the UTI Credit Opportunities Fund will look for debt offerings with A or lower rating (but still investment grade) and will invest in those to juice up returns.

The only way to find out whether this strategy will work or not is to give the fund time and see it’s performance. I don’t think there is any way to reasonably predict how the fund will do at this point of time.

I’ve often written in the past that there should be a really compelling reason for you to invest in a mutual fund NFO like getting access to an asset class that wasn’t previously there or a really cheap index fund, and I don’t see any such reasons in this fund.

The idea is certainly interesting, and can end up to be a really good scheme but there simply is no way to find that out other than waiting for the fund to list and see it’s performance for a couple of years.

Business Line has some more details on the this Credit Opportunities Fund where they talk about default rate of A rated securities and that’s a good read for anyone considering this fund for investment.

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