UBL Stock Advantage Fund – Analysis

Mutual funds have become an increasingly important part of Pakistan’s financial system, providing investors with a structured way to participate in capital markets. For many individuals, directly buying and managing stocks can be overwhelming, requiring time, knowledge, and risk management skills. Mutual funds bridge this gap by pooling investor money, appointing professional managers, and creating diversified portfolios that balance risk and return.

Among Pakistan’s equity mutual funds, the UBL Stock Advantage Fund (USF) is among the most prominent. Managed by UBL Fund Managers, it has been operating since August 2006 and is benchmarked against the KSE-100 Index. With a strong focus on long-term capital growth through equity investments, the fund has shown consistent results and has outperformed its benchmark over time.

Fund Overview

The UBL Stock Advantage Fund (USF) is an open-end equity mutual fund that commenced operations on August 4, 2006. Its core objective is to deliver long-term capital growth by investing primarily in equities listed on the Pakistan Stock Exchange (PSX). The fund is actively managed with the aim of generating returns in excess of its benchmark, the KSE-100 Index.

As of September 30, 2025, USF managed assets worth Rs. 29,516 million, with a Net Asset Value (NAV) of Rs. 266.22 per unit. With nearly all of its portfolio allocated to equities, the fund carries a high-risk profile, making it most appropriate for investors who are comfortable with market fluctuations and seek long-term wealth creation.

The fund’s fee structure reflects its actively managed strategy. It charges a management fee of up to 3% per annum, while the Total Expense Ratio (FYTD) stood at 3.85%, representing the overall costs borne by investors for professional management and administration.

Fund Details (Sep 2025):

Portfolio Analysis

UBL Stock Advantage Fund maintains a diversified equity portfolio across major economic sectors of Pakistan, while focusing on large-cap blue-chip companies with strong fundamentals and dividend potential.

Sector Allocation

The portfolio reveals a thoughtful balance between stability and growth-oriented sectors. A dominant 26.42% allocation in Commercial Banks underscores reliance on steady earnings, liquidity, and dividend income from the financial sector. Substantial exposure to Fertilizer (11.43%), Cement (10.73%), and Oil & Gas Exploration (10.37%) captures opportunities linked to agricultural demand, infrastructure expansion, and energy market recovery. The Textile Composite (5.37%) allocation adds export-driven diversification, benefiting from currency trends. Meanwhile, the Others (30.69%) segment enhances flexibility and risk dispersion. Overall, the sectoral mix reflects a balanced, moderately aggressive investment strategy focused on consistent returns and economic resilience.

Top 10 Holdings

The portfolio reflects a strategic blend of income stability and cyclical growth. Heavy weighting in Fauji Fertilizer (8.26%) signals a defensive bias and preference for consistent dividend yield. Exposure to Oil & Gas Development and leading cement producers like Lucky Cement and D.G. Khan Cement positions the fund to benefit from infrastructure and energy sector recovery. The strong presence of major banks UBL, Meezan, HBL, and MCB provides liquidity and resilience against market volatility. Industrial holdings such as Engro and Tariq Glass further diversify earnings streams. Overall, the portfolio achieves balanced risk-adjusted returns through blue-chip dominance and cross-sector exposure.

Performance Analysis

Rolling & Long-Term Performance

The UBL Stock Advantage Fund (USF) has delivered steady rolling returns across shorter horizons, maintaining close proximity to its benchmark despite market volatility. While slightly trailing over the 3- and 6-month periods, the fund’s 1-year performance of 111.85% versus 104.03% for the benchmark showcases its strength in capturing upside during bullish phases. The rolling performance indicates the fund’s agility, tactical asset allocation, and resilience in rapidly shifting market environments, highlighting effective short-term positioning and active management discipline.
Over extended horizons, USF’s track record is exceptional, reflecting its strong compounding potential and strategic consistency. The fund’s 3-year and 5-year cumulative returns outpaced the benchmark, while the since inception return of 2099.22% compared to 1230.96% demonstrates its long-term wealth-building capability. This sustained outperformance is driven by disciplined portfolio diversification, timely sector rotation, and a focus on fundamentally strong blue-chip stocks. The long-term data affirms USF’s ability to outperform through multiple market cycles, offering investors consistent, risk-adjusted returns and reliable capital appreciation over time.

Annual Performance Analysis

The UBL Stock Advantage Fund (USF) has consistently outperformed its benchmark over the past decade, demonstrating exceptional long-term performance. From FY2015 to FY2025, the fund’s cumulative return rose from 279.8% to 1605%, compared to the benchmark’s 183.5% to 910.3%, achieving an impressive outperformance of nearly 695 percentage points. Strong gains in FY2017, FY2021, FY2024, and FY2025 highlight effective sector allocation and active management. Even during weaker market years, the fund maintained resilience through prudent diversification. Overall, USF’s performance reflects disciplined investment strategy, superior stock selection, and consistent ability to generate strong, risk-adjusted returns over time.

Risk and Efficiency Analysis

The UBL Stock Advantage Fund (USF) demonstrates robust efficiency and well-managed risk exposure. With a standard deviation of 22.43%, the fund maintains market-level volatility while achieving superior risk-adjusted returns, reflected by a Sharpe ratio of 4.11. A beta of 1.04 shows that the fund closely mirrors market movements, whereas an alpha of 7.82% signifies consistent outperformance through active management.

The R-square of 96.95% confirms strong benchmark alignment. The low portfolio turnover ratio (0.01%) highlights the fund’s disciplined, long-term approach and minimal trading costs. Overall, the fund balances risk and return effectively, outperforming the benchmark through sound stock selection and strategic positioning making it a strong choice for investors seeking steady, risk-adjusted growth.

Comparative Positioning

The UBL Stock Advantage Fund (USF) has exhibited a balanced performance profile, combining strong long-term growth with effective risk management. In FY2025, USF delivered a 29.00% return versus 31.73% for the benchmark, showing marginal short-term lag. However, the fund’s best performance year (FY2024–25) saw a robust 111.85% return, significantly beating the benchmark’s 104.03%, highlighting superior stock selection. Importantly, USF demonstrated resilience in volatile markets, with smaller losses in downturns like FY2022. Since inception, its CAGR of 17.50% versus 14.46% for the benchmark underscores sustained value creation and efficient long-term fund management.

Suitability for Investors

Who should invest:

The UBL Stock Advantage Fund is ideal for investors who are in it for the long run and can handle the ups and downs of the stock market. It suits those who aim to grow their wealth over time by investing in Pakistan’s equity market. It’s also a good fit for individuals who prefer to rely on professional fund managers and want a diversified portfolio rather than picking individual stocks themselves.

Who should avoid it:

This fund isn’t the right choice for conservative investors who prefer safety and steady returns. It also doesn’t suit short-term investors who may be uncomfortable with volatility or potential short-term losses in the value of their investment.

Conclusion

The UBL Stock Advantage Fund (USF) continues to demonstrate exceptional long-term performance and disciplined management, positioning itself as one of the most consistent equity funds in Pakistan. As of October 17, 2025, the fund’s Net Asset Value (NAV) stands at Rs. 261.60, reflecting solid value growth for investors. Despite short-term market fluctuations, USF’s since inception CAGR of 17.5% and strong risk-adjusted performance (Sharpe Ratio: 4.11) underscore its ability to deliver sustained returns above the KSE-100 benchmark.

With a total expense ratio of 0.98%, USF remains cost-efficient, allowing investors to retain a larger share of returns. The fund’s strategic exposure across commercial banks, cement, oil & gas, and fertilizers provides sectoral balance and resilience against volatility. Overall, the fund exemplifies strong governance, efficient cost management, and long-term wealth creation, making it a reliable choice for investors seeking consistent equity market exposure and superior capital appreciation.