With vSphere 5 update manager discontinued patching of guest operating systems. It does however provide upgrades of VMware Tools, upgrades of the virtual machine hardware for virtual machines and upgrades of virtual appliances.
With vSphere 5.1 VMware introduced bundles (Standard and Standard Acceleration Kit with Operations Management) that include vCenter Protect Standard (Shavlik). vCenter Protect includes the ability to scan and patch vm and templates (Microsoft updates and other 3rd party apps), details here: http://www.vmware.com/uk/products/datacenter-virtualization/vcenter-protect/standard.html