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WF: How is the asset allocation decided between the various asset classes? How often is the allocation reviewed?
Naren: ICICI Prudential Dynamic Plan is a diversified flexi-cap fund that follows a multi-prong strategy combining between equity, fixed income, foreign securities, REITs, InvITs and cash. The allocation to any of these asset classes depends on several factors. When it comes to equity especially sector calls, a top-down perspective is applied taking into consideration various factors such as fiscal policy, current account deficits, inflation, economic growth rates.
Also, the fund seeks to take opportunistic exposure in other assets when domestic equity markets are expensive. This is where foreign securities come into play. Given that cash is a part of the strategy, the fund can hold cash up to 35% of its portfolio during volatile markets. The portfolio break-up as of June 30, 2017, is as follows - Equity: 72.07%, Fixed Income: 17.57%, Foreign Equity: 5.72% and Cash: 4.64%. Thus far, this strategy has worked well for the fund as can be gauged from the performance. The allocation between various asset classes is reviewed on a daily basis.
Consistent Performance
This fund has outperformed in each year, with the only exception being 2007 when markets were in bubble territory
Past performance may or may not be sustained in future. Inception Date: October 31, 2002. Source: MFI Explorer. The information is only for distributors and Advisors of ICICI Prudential AMC and the same should not be circulated to investors/prospective investors
WF: For the 35% max that can get allocated outside domestic equities, is it a relative return prospect over a 1 year basis that determines the relative allocation?
Naren: These investment decisions are largely on account of the diversification opportunities into companies in developed nations, which may/may not be available in the listed space in India.
WF: Is the domestic equity component managed largely on a contra/value orientation?
Naren: The fund does take a contra/value investing approach, which is actively managed. The portfolio currently has a large-cap bias. The scheme can invest across market capitalisation (large, mid and small) based on attractiveness of valuation across the segments. Yes, the fund takes contrarian calls and hence could underperform in the short-term. However, over the long term, the fund could give steadier returns as can be seen from the given below returns pattern.
Past performance may or may not be sustained in future. Inception Date: October 31, 2002. Source: MFI Explorer. Performance data in CAGR (%) terms and of growth option. Data as of June 30, 2017. BM: Benchmark (Nifty 50 Index). Date of 1st NAV: November 13, 2002 .The information is only for distributors and Advisors of ICICI Prudential AMC and the same should not be circulated to investors/prospective investors
Past performance may or may not be sustained in future. Inception Date: October 31, 2002. Source: MFI Explorer. Performance data in CAGR (%) terms and of growth option. Data as of June 30, 2017. BM: Benchmark (Nifty 50 Index). Date of 1st NAV: November 13, 2002. The information is only for distributors and Advisors of ICICI Prudential AMC and the same should not be circulated to investors/prospective investors
WF: What are your key overweight positions currently and what briefly is the investment thesis for these?
Naren: The fund is currently overweight the Pharmaceuticals sector vis-à-vis the benchmark and has marginally increased its exposure to the sector since previous month due to attractive valuations. Despite the pessimism surrounding the sector, we believe there are ample growth opportunities in the local & global markets as the USFDA issues start getting resolved.
Also, Power is another sector which has significantly overweight position, vis-à-vis the benchmark and its exposure to the sector is among top five in the portfolio. We believe the sector could gain from falling interest rates and good earnings growth is expected over the long term.
WF: Is the fixed income segment managed largely as an accrual fund? How is this component positioned currently?
Naren: It is not managed as an accrual fund. As of June we have some duration calls, as well.
WF: Should advisors be benchmarking this fund against balanced funds or dynamic asset allocation funds for clarity in positioning and understanding of relative performance?
Naren: ICICI Prudential Dynamic Plan is a conservative flexi cap fund with flexibility to move across asset classes and follows contrarian/value investing approach. It would be ideal to measure its performance against its specified benchmark - Nifty 50 index. With a very low beta this fund has managed to generate relatively better alpha, over long term. Benchmarking this fund against balanced and balanced advantage category of funds won't be a prudent measure as the constituents in terms of asset class are different.
WF: What is the key investment argument for this fund at this point?
Naren: This is an all-weather conservative equity fund with good long term performance track record. This fund is positioned to be defensive when required and aggressive when necessary. Given that markets are volatile, this fund benefits from its investment approach which is the agility to capture upside opportunities in the market across market capitalizations. The flexibility of higher allocation to cash in an expensive/volatile market is one of the distinguishing features of the Fund.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
The information is only for distributors and Advisors of ICICI Prudential AMC and the same should not be circulated to investors/prospective investors. All data/information used in the preparation of this communication is specific to a time and may or may not be relevant in future post issuance of this communication. ICICI Prudential Asset Management Company Limited (the AMC) takes no responsibility of updating any data/information in this communication from time to time. The AMC (including its affiliates), ICICI Prudential Mutual Fund (the Fund), ICICI Prudential Trust Limited (the Trust) and any of its officers, directors, personnel and employees, shall not 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 communication in any manner.
Nothing contained in this communication shall be construed to be an investment advice or an assurance of the benefits of investing in the any of the Schemes of the Fund. Recipient alone shall be fully responsible for any decision taken on the basis of this document.
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