UTI Aggressive Hybrid Fund (UAHF) stands out in the aggressive hybrid fund category for its disciplined value-oriented approach to equity investing. Rather than chasing market momentum, the fund invests in fundamentally strong companies trading below their intrinsic value. While such a strategy demands patience, as the market can take time to recognise the true worth of these businesses, it has rewarded long-term investors with consistent performance.

The fund has remained an above-average performer within its category over the long run. Among the oldest hybrid mutual funds in India, UAHF has a track record spanning more than three decades and has delivered an annualised return of 14.5 per cent since its launch in March 1995.

As mandated by the regulator, aggressive hybrid funds invest 65-80 per cent of their portfolio in equities and 20-35 per cent in debt instruments, seeking to balance growth with stability. This asset mix makes them suitable for investors with a moderate risk appetite.

Equity strategy

UTI Aggressive Hybrid Fund follows a dynamic asset allocation strategy, maintaining equity exposure between 66 per cent and 74 per cent over the past five years, with the balance invested in debt. On the equity side, the fund is managed like a flexi-cap strategy, allocating roughly two-thirds of its equity portfolio to large-cap stocks. Over the last five years, large-cap exposure averaged 48 per cent of total assets, while the remainder was invested in mid- and small-cap stocks.

The fund follows a relative value investment approach, favouring companies trading below their historical valuations or at discounts relative to peers and benchmark valuations. Its core equity portfolio is built around large-cap companies with strong fundamentals that are considered undervalued relative to their long-term earnings potential. The allocation to mid- and small-cap stocks seeks to generate alpha through a combination of undervalued businesses, turnaround opportunities and companies offering growth at reasonable valuations.

Stock selection follows a structured valuation framework rather than relying on a single metric. Banks are assessed primarily using price-to-book multiples, IT companies through price-to-earnings ratios, commodity businesses using EV/EBITDA, real estate companies through price-to-net asset value, and insurance companies based on price-to-embedded value.

The fund continues to emphasise valuation discipline over market momentum. While this approach has supported long-term returns, it can result in temporary periods of underperformance when richly-valued growth sectors dominate market gains.

Currently, the fund is overweight on IT, banking and telecom, while remaining underweight on capital goods, consumer durables and automobiles, where valuations are considered stretched despite strong recent performance. Banks, IT and pharmaceuticals remain the top three sector exposures. Over the past year, the fund increased allocations to construction, power and insurance by 1-2 percentage points, while reducing exposure to banks, oil and gas, and metals by 2-4 percentage points.

Debt strategy

The debt portfolio follows a high-quality strategy, with most of its investments allocated to AAA-rated corporate bonds or government securities over the past five years. According to the latest portfolio, government securities account for 12.4 per cent of assets, while AAA-rated corporate bonds constitute 9.8 per cent. AA+ rated securities account for 1.6 per cent of the portfolio, with holdings including Cholamandalam Investment & Finance, Muthoot Finance, Piramal Capital & Housing Finance, and Torrent Pharmaceuticals. The fund has maintained portfolio duration in the four-seven year range over the last five years.

Returns

The fund delivered strong performance between 2020 and 2025, benefiting from the outperformance of value stocks and robust gains in its small-cap holdings. During this period, it generated an annualised return of 18.5 per cent, comfortably ahead of the category average of 16.2 per cent.

Performance over the past year, however, broadly matched the category, with the fund declining around 1 per cent. The weaker showing was driven by three factors: An overweight position in IT during a period of sector weakness, a deliberate avoidance of high-flying sectors such as defence, capital goods and power, and stock-specific disappointments within parts of the small-cap portfolio.

The fund has consistently outperformed the category on a rolling return basis. Its average five-year rolling return stands at 18.5 per cent, compared with the category average of 16 per cent, with rolling returns ranging between 12 per cent and 26 per cent. On a three-year rolling basis, it has delivered an average CAGR of 18 per cent versus the category average of 15 per cent.

The regular plan carries a base expense ratio of 1.54 per cent, lower than the category average of 1.73 per cent. However, the direct plan’s expense ratio of 0.98 per cent is marginally higher than the category average of 0.72 per cent.

The fund is best suited for long-term investors who can remain invested through temporary phases of underperformance without reacting to short-term market trends. Investors can invest through a systematic investment plan (SIP) and maintain an investment horizon of at least five years.

Published on June 27, 2026