|
The power of three
Debt funds suit a whole lot of investors looking conservative investments that have lower risk, at the same time providing a better yield environment. Among the whole roster of debt funds, however, the power of these three funds could appeal to investors as they cover various risk profiles in the debt market: ICICI Prudential Short Term Fund, ICICI Prudential Long Term Fund and ICICI Prudential Regular Savings Funds.
These three funds help complete an investor's debt portfolio requirements as they cover the entire debt market spectrum. They also have different risk profiles, thus helping investors maintain their required levels of risk appetite.
The power of three aims to generate capital appreciation based on buying and selling debt paper. But these funds are distinguished in their investment strategies. While ICICI Prudential Long Term Plan does take tactical call on duration, the Regular Savings Plan focuses on yield to maturity and accrual incomes to generate returns for investors and ICICI Prudential Short Term Plan serves as a short-term savings solution that allows investors to conserve wealth. In all, they cover the vital aspects of an investors debt fund requirements.
Why should one invest in Power of 3?
In this current environment, interest rates have been on a downtrend since January 2015. The Reserve Bank of India has cut interest rates cumulatively by 150 basis points during this period. As inflation is trending lower, there could be some more easing of interest rates in the economy, which investors must take advantage of by investing in debt funds. However, some of the rate cuts have already happened, and hence these funds with their higher to moderate duration in debt allocations, can benefit from where the interest rate cycle is placed currently.
Here's more on three funds that can complete your debt investment profile.
ICICI Prudential Short Term Plan
In the shorter end of the debt market, this is among the funds aims to identify and invest in securities that offer better yields.
The fund holds an average duration of between one and three years. As the fund stays within the short-end of the yield curve, it provides reasonable returns with less much lower risks. The fund also aims to capture credit spreads and tactical investment opportunities in the debt market. It enhances its portfolio with tactical G-sec investments and uses conditions in the more liquid G-sec space to uncover pricing distortions. The fund also maintains reasonable exposure to yield-to-maturity paper and seeks to capture credit spreads. It aims to benefit investors by taking exposure in medium to duration calls, and also holds debt paper till maturity to provide accrual returns to investors. Suited for investors with a shorter-term horizon with a view to providing superior levels of yield with lower risk.
Click here to download product note of ICICI Prudential Short Term Plan
ICICI Prudential Long- Term Plan
In a deflationary environment, a suitable way of benefiting due to a reduction in interest rates is by adding duration funds to one's portfolio. ICICI Prudential Long-Term Plan does tactical allocation to the debt market based on where interest rates are heading. So, for instance if the interest rates are headed lower, the fund may increase the average maturities of all the debt paper the fund holds. All this is done through a structured and in-house model that aids in taking these duration calls.
The fund can tactically shift between long- and short-duration paper to increase or decrease durations according to market conditions. Besides, it takes exposure to G-secs to make the most of liquid market conditions and hold an edge in debt investments. The plan also has the flexibility to change durations within a range of one to ten years to swing between maturities. Over 70 percent of this fund's portfolio comprises of AAA-rated corporate paper, as well as sovereign debt.
This fund is ideal for investors seeking to make most of a fall in interest rates in current times.
Click here to download product note of ICICI Prudential Long Term Plan
ICICI Prudential Regular Savings Fund - An Accrual Fund with an aim for stability in returns
The ICICI Regular-Savings Fund aims to generate returns by focusing on strategy of accrual returns.
The fund generally buys-and-holds debt paper till maturity and thus benefits from the accruing interest. At the same time, the fund aims to make the most of the better yield-to-maturities by holding debt paper till maturity. This strategy helps reduce risk and also brings down volatility in the debt market. The fund also keeps a lower maturity profile. The debt paper the fund invests in ranges between 1-3 years, while investing a high percentage of its portfolio in AAA rated paper. The fund does not keep any exposure to the sharper sovereign debt paper segment to further keep a lid on choppiness in debt markets. The fund is suitable for investors who like less volatility for conservative returns.
Click here to download product note of ICICI Prudential Regular Savings Fund
Power of 3 - a quick snapshot
If earning better yields from your investment is your chief goal, it is worth looking at some of the debt funds that can provide a holistic coverage to your investment profile.
As the interest rate cycle is trending lower, it is helping lift the pricing in debt market and improve sentiments simultaneously. Second, the investment profiles of companies are improving on the back of a slowly recovering economy.
In preparation of the material contained in this document, ICICI Prudential Asset Management Company Limited (the AMC) has used information that is publicly available, including information developed in-house. Some of the material used in the document may have been obtained from members/persons other than the AMC and/or its affiliates and which may have been made available to the AMC and/or to its affiliates. Information gathered and material used in this document is believed to be from reliable sources. The AMC, however, does not warrant the accuracy, reasonableness and / or completeness of any information. We have included statements / opinions / recommendations in this document, which contain words, or phrases such as "will", "expect", "should", "believe" and similar expressions or variations of such expressions that are "forward looking statements". Actual results may differ materially from those suggested by the forward looking statements due to risk or uncertainties associated with our expectations with respect to, but not limited to, exposure to market risks, general economic and political conditions in India and other countries globally, which have an impact on our services and / or investments, the monetary and interest policies of India, inflation, deflation, unanticipated turbulence in interest rates, foreign exchange rates, equity prices or other rates or prices etc. The AMC (including its affiliates), the Mutual Fund, the trust and any of its officers, directors, personnel and employees, shall not be liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this material in any manner. The recipient alone shall be fully responsible/are liable for any decision taken on this material. All figures and other data given in this document are dated and the same may or may not be relevant in future. Investors are advised to consult their own legal, tax and financial advisors to determine possible tax, legal and other financial implication or consequence of subscribing to the units of ICICI Prudential Mutual Fund. The sector(s)/stock(s) mentioned in this communication do not constitute any recommendation of the same and ICICI Prudential Mutual Fund may or may not have any future position in these sector(s)/stock(s). Past performance may or may not be sustained in the future. The portfolio of the scheme is subject to changes within the provisions of the Scheme Information document of the scheme. Please refer to the SID for investment pattern, strategy and risk factors.
Share this article
|
AMC Speak
