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WF: 23x over 15 years, averaging 24% annual returns is a truly commendable 15 year journey for I Pru Dynamic. What would you say are the biggest learnings for your investment team in navigating this fund so successfully over the last 15 years?
Naren: The key lesson our investment team has learnt over the last fifteen years, is that markets are 'dynamic' and tend to move in cycles, gyrating between extreme pessimism to extreme optimism and vice-versa. The fact that ICICI Prudential Dynamic Plan has the ability to turn both conservative and aggressive makes it a very interesting pick for long-term investing. The fund was launched at the end of the biggest bear market in India. Thereafter, we have seen a complete market cycle comprising a rally (2007), significant correction (2008) and a recovery/rally (2009) followed by a sideways movement (till 2013).
Performance Scoreboard
Past performance may or may not be sustained in future. Performance data refers to growth plan. #Inception date of growth plan: October31, 2002. ^Inception of dividend plan: January 09, 2004. Source: MFI Explorer. Data as of Sep 30, 2017.
Consistent Performance
ICICI Prudential Dynamic Plan has outperformed in each year except in 2007, when markets were in bubble territory
Past performance may or may not be sustained in future. Inception Date: October31, 2002. Source: MFI Explorer.
WF: Though Dynamic is positioned as a multi-asset fund with an ability to invest in REITs/InvITs and offshore equity in addition to domestic equity, debt and cash, the proportion of offshore equity (around 6%) and REIT/InvIT (0%) is rather low currently. How do you see the ratios between the various asset classes moving, going forward?
Naren: It is difficult to predict how the ratios will move between various asset classes in the days ahead. However, it is possible that there may be times when this fund will be very aggressive, or turn defensive, depending on the prevailing market conditions. We believe such an approach to markets, makes this fund an ideal lump sum investment opportunity for the long-term, even though there may be phases of subdued performance owing to the portfolio positioning. In effect, this is not a fund which can be compared to an equity benchmark.
The portfolio of the scheme is subject to changes within the provisions of the Scheme Information Document of the Scheme. REIT: Real Estate Investment Trust. InvITs: Infrastructure Investment Trusts.
WF: You take contrarian calls in the equity space, which have paid off well historically - although as your presentation suggests, investors need to be patient for such calls to pay off, especially when you bet against momentum. What are some of the contrarian calls you are currently taking which you believe will do well over the next 3 years?
Naren: Sectors like technology and health care is the contrarian call which we think may do well over the next three years. In the recent past, one of our contrarian calls, which were corporate banks, have already played out, delivering returns higher than the benchmark.
WF: Is taking cash call now a sensible contrarian bet to take? How do you see markets moving in the short to medium term?
Naren: In this fund, when the market turns expensive, profits are booked and moved to other asset class while when the markets become cheap, the equity holding increases. It is in light of this arrangement (based on valuation) that cash calls, if any, are taken. From a short-term perspective, market is a function of how the inflow momentum pans out. In the medium-term, we believe as the capacity utilisation of Corporate India improves, earnings too will go up. Currently, we have a low base given the muted earnings thus far.
Contrarian Calls Taken In Past
The portfolio of the scheme is subject to changes within the provisions of the Scheme Information Document of the Scheme. Past performance may or may not be sustained in future. Source: MFI Explorer, Internal.
WF: What is your fixed income strategy in this fund and how are you positioning the fixed income portion of the fund in the current debt market environment?
Naren: We have a fairly large exposure to perpetual bonds (of fundamentally strong banks), which have high coupon and a small allocation to accrual securities.
Active Fixed Income Allocation
The portfolio of the scheme is subject to changes within the provisions of the Scheme Information Document of the Scheme. Source: Internal, Data as of Oct 30, 2017.
WF: For investors who are looking at making a choice between your BAF and your Dynamic Fund, how would you suggest they evaluate suitability to make an appropriate choice?
Naren: We believe ICICI Prudential Balanced Advantage Fund (BAF) is more conservatively positioned and is apt for conservative investors when compared to ICICI Prudential Dynamic Plan. As of November 21, 2017, the net equity weightage in BAF was 37.14% as against that of Dynamic Plan at 74.10% .
We believe Dynamic Plan is more aggressive in nature as compared to BAF but as and when the equity cycle turns (is about to get over), we may take an equally conservative stance in Dynamic Plan. Having said this, Dynamic Plan is more conservative than a pure equity fund.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
The information contained herein is only for the reading/understanding of the registered Advisors/Distributors and should not be circulated to investors/prospective investors. All data/information in this material is specific to a time and may or may not be relevant in future post issuance of this material. ICICI Prudential Asset Management Company Limited (the AMC) takes no responsibility of updating any data/information in this material 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 material in any manner. 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. Nothing contained in this document shall be construed to be an investment advise 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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