AMC Speak 4th May 2015
Have you considered this solution for your conservative retail clients?
Suraj Kaeley, Group President Sales & Marketing, UTI MF
 

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Conservative portfolio (60% debt, 40% equity), 43 year track record, CAGR since inception of over 11%, reducing term cover wrapped around it to make it a cost-effective ULIP, strong retail brand : does this sound like a good solution for your conservative retail clients? Suraj Kaeley throws a spotlight on one of UTI's oldest products - UTI ULIP, which continues to be just as relevant to retail savers across the country today, as it has always been. What's changing now is Suraj's resolve to promote this solution far more aggressively going forward - which means useful tailwinds for retail distributors who want to leverage this opportunity and offer a neatly packaged solution to their conservative retail clients.

WF: What are the features of the insurance cover within UTI ULIP and how does this compare with ULIPs of life insurance companies?

Suraj: UTI ULIP provides life insurance cover up to Rs. 15 lac (Max coverage) per investor depending on the target amount chosen by him/her with an option to choose 10 year or 15 year Plan. The coverage is available on Fixed Term basis or Declining term basis and one can choose based on his needs. The chosen target amount is required to be contributed in yearly and half yearly installments or through Systematic Investment Plan ( SIP) over 10/15 years as indicated at the time of entry. The scheme is open for investment to resident individuals as well as NRIs including investment in the name of spouse/child. The age limit of applicant at the time of entry for the 10 year plan is 12 and 55 ½ years and 12 and 50 ½ years for 15 year plan.

Market ULIPs come in different forms where policy term varies from 10 years to 30 years and the sum assured depends on age bracket. The premium payment plan comes in the form of Regular Premium / Limited Premium and single premium. UTI ULIP is a mutual fund product and the expense ratio of the fund is as per the limits stipulated by SEBI Mutual Fund Regulations. ULIPs floated by insurance companies are governed by IRDA .

WF: Is the insurance premium amount to be paid separately from the investment amount or is it embedded? Is the term cover protected in any way in the event that an installment of the premium is not paid?

Suraj: Under UTI ULIP the insurance premium amount is not required to be paid separately. It is embedded in the contribution amount to be made by the investors. As per the terms of the arrangement, the life insurance premium by the unit holder from each contribution made for obtaining group insurance cover on the life of unit holder from LIC or any insurance company under arrangement with LIC or any insurance company. The premia are paid for a period of 7 and 10 years for the 10 and 15 year plan periods respectively. In the event of non receipt of a contribution /installment from the unit holder, premium will be paid to LIC or any other insurance company by redeeming the existing units subject to authorization by the unit holder in the application form and availability of active units in the unitholder's folio.

WF: How the portfolio is structured in terms of debt and equity components? How are the debt and equity components managed in terms of portfolio strategy?

Suraj: Currently the portfolio has 61% investment into debt assets while the balance is into equities. The debt portion is broadly managed like a long term bond fund with a mix of government and corporate bonds. The duration that the debt portion runs is in line with our long term interest rate view and averages between 3 and 5 years. The portfolio manager's focus is on well researched and rated securities in the AA to AAA ratings and our research view on corporate spreads plays a big role in deciding the mix of corporate and government bonds. The overall strategy is with a view to generate income with low to moderate interest rate risk. The equity portion of the fund is invested in a mix of large caps and mid& small caps. Given the long term orientation of this fund we follow a strategy of investing into such businesses that have strong future growth outlook with strong return on capital so that our capital keeps getting compounded for a long period of time. The sectors that fit into this criteria are Banking & Financial services, Pharmaceutical, Consumer and Information Technology. We endevaour to hold a good part of our portfolio into these sectors.

WF : What is the track record of returns of UTI ULIP?

Suraj: UTI ULIP has a track record which spans over 43 years in the industry. The fund has a decent track record of performance across various market cycles. The fund has outperformed its benchmark (Crisil Balanced Fund Index) on various time periods. The fund has delivered 10.52% against 9.38% of benchmark on 5 years time period as of Mar 2015. The returns since its inception are 11.05% on CAGR basis as of Mar 2015.

WF: Given the low cost life insurance, the reducing term option, the conservative portfolio structure and the long track record, this seems to be a great product for first time investors venturing beyond traditional fixed deposits. What has been your experience in taking this product into retail markets across the country and what are plans to popularize it further?

Suraj: UTI ULIP is a vintage product in the market and its popularity extends to far reaching centers like district, Taluka and Tehsil. We are dominant in B 15 because of investor's preference for ULIP on account of its simplicity and trust factor. Last year we saw good mobilizations and we want to capitalize on the momentum by lending more marketing focus and by conducting investor awareness programs. We look forward to coming out with product promotion plan where Fund Manager can share his thoughts on investment philosophy and its merit for having it in investor's portfolio. The press/ media coverage in vernacular language will be another mode of promotion towards reaching investor community at large. Online and Social Media will be utilized extensively to market the product amongst T 15 investor segments.

WF: How are you proposing to strengthen distributor engagement on UTI ULIP to ensure higher distribution mindshare and therefore higher retail allocations towards this proposition?

Suraj: The distributor engagement on UTI ULIP is a key focus area for 2015-16. We want to increase the number of distributors as well as mind share towards greater retailization of the product. We aim to target regions based on certain gaps in terms of allocation and overall AUM. We look forward to cross sell the product through potential distributors and also through new genre ARN holders. The captive ARNs are another segment where we want to work closely to improve our market share. The product has all what it takes to offer an integrated solution combining life insurance and asset allocation to target wealth creation , insurance coverage and tax benefits on a long term basis.




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