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Click here to know more about percentiles and the colour codes
What do percentiles and their colours signify?
Fund performance is typically measured against benchmark (alpha) and against competition.
Performance versus competition is measured through percentile scores - ie, what
percentage of funds in the same category did this fund beat in the particular period?
If a fund's rank in a year was 6/25 it means that it stood 6th among a total of
25 funds in that category, in that period. This means 5 funds did better than this
fund. In percentile terms, it stood at the 80th percentile - which means 20% of
funds did better than this fund, in that particular period. If, in the next year,
its rank was 11/26, it means 10 other funds out of a universe of 26 did better than
this fund - or 38% of funds did better than this one. Its percentile score is therefore
62% - which signifies it beat 62% of competition.
Most fund managers aim to be in the top quartile (75 percentile or higher) while
second quartile is also an acceptable outcome (beating 50 to 75% of competition).
What is generally not acceptable is to be in the 3rd or 4th quartiles (beating less
than 50% of competition). Accordingly, we have given colour codes aligned with how
fund houses see their own percentile scores. Green colour signifies top quartile
(percentile score of 75 and above), yellow or amber signifies second quartile (percentile
scores of 50 to 74) and red signifies 3rd and 4th quartile performance. A simple
visual inspection of colour codes can thus give you an idea of how often this fund
has been in the top half of the table and how often it slips to the bottom half.
A great fund performance is one which has only greens and yellows and no reds -
admittedly a tall ask!
WF: The fund has a strong track record of Y-o-Y alpha generation over the years, although the current year has started off on a relatively challenging note. How is the portfolio currently positioned?
Naren: Balanced Fund aims to predominately invest in blend of large and midcap stocks. From a portfolio positioning perspective, the fund continues to remain slightly overweight on power. IT, pharma and chemicals are some of the bottom up picks in the portfolio.
From a medium term perspective, we believe balanced fund continues to remain a suitable pick for an investor considering to invest, even in current market, given the availability of both debt and equity component.
Consistent Outperformance
Data Source: MFI; Data in % CAGR terms; Returns are calculated for the period between Apr 1, 2012 to Apr 30, 2017. Past performance may or may not sustain in the future. It is necessary to consult tax/financial advisor before making investments in mutual funds. Information only for distributors and financial advisors of ICICI Prudential Mutual Fund.
Data Source: MFI; Data in % CAGR terms; Returns are calculated for the period between Apr 1, 2012 to May 31, 2017. Past performance may or may not sustain in the future. It is necessary to consult tax/financial advisor before making investments in mutual funds. Information only for distributors and financial advisors of ICICI Prudential Mutual Fund
WF: How is the equity component managed in terms of style and market cap bias?
Naren: The allocation is decided on a tactical basis rather than any predefined ratio. Stock-picking is generally through a bottom-up approach, seeking to identify companies that have above-average profitability and are supported by sustainable competitive advantages. The fund also uses a "top-down" approach for risk control through sectoral diversification.
WF: Balanced funds have seen huge retail investor appetite as they are perceived as "safer" equity oriented options than diversified equity funds especially when valuations are rich but sentiment continues to be strong. Is there any change that you have made in fund management strategy to recognize influx of retail money with these perceptions?
Naren: One of the best ways of playing both equity and debt market is by investing lump sum in balanced funds as it provides one of the most stable ways of investing with an aim to create wealth. Also, the level of risk associated here is lower than diversified pure equity funds.
There has been no change in the strategy followed on account of increased inflows.
Investment journey thus far...
Data Source: MFI; Data as of May 31, 2017. Returns in CAGR % terms. Past performance may or may not be sustained in future. It is necessary to consult tax/financial advisor before making investments in mutual funds. Information only for distributors and financial advisors of ICICI Prudential Mutual Fund.
Through SIPs
Data Source: MFI; Data as of May 31, 2017. Returns in CAGR % terms. Past performance may or may not be sustained in future. It is necessary to consult tax/financial advisor before making investments in mutual funds. Information only for distributors and financial advisors of ICICI Prudential Mutual Fund.
WF: What latitude on asset allocation do you give yourself in this fund? Do you take cash calls when you believe market valuations are unsustainable? What are current cash levels and how has this moved in recent months?
Naren: ICICI Prudential Balanced Fund invests in both equity and debt asset classes. The equity levels are adjusted between 65-80% based on market valuations and the fixed income asset class is also managed dynamically. In terms of cash call, as on April 30, 2017, the cash level stands at 4.6% of the portfolio.
Data as of May 31, 2017; RHS: Equity Level of ICICI Prudential Balanced Fund; LHS: S&P BSE Sensex Level. Information only for distributors and financial advisors of ICICI Prudential Mutual Fund. The asset allocation and investment strategy of the Scheme will be as per the Scheme Information Document
As on April 30, 2017, the fund's equity portfolio comprises majorly of large-cap stocks (76%) that are better placed when compared to small (2%) and midcaps (22%) in terms of valuations.
WF: Monthly/quarterly dividends from balanced funds have become a key selling proposition - regular income coupled with capital appreciation potential is an attractive combo. What is your dividend policy for this fund? How should we communicate the dividend proposition to ensure we don't mis-sell or mis-represent?
Naren: Along with growth option, the fund offers dividend across varying frequencies - monthly, half yearly and annual. The payment of dividend is subject to availability of distributable surplus and Trustee approval. This is one message which has to reach the investor such that they make an informed decision.
The dividend track record of the fund has been consistent as shown below…
Delivering Consistent Dividends
Data Source: MFI, data as of June 05, 2017; Face Value: Rs. 10. After payment of dividend, NAV of dividend option under the Scheme has fallen to the extent of payout and statutory levy, if applicable. Past performance may or may not sustain in future
For someone planning to obtain monthly cash flow, one can opt for Monthly Dividend + Automatic Withdrawal Plan. By choosing this option, one can receive dividend declared by the fund every month. In a rare case, if the fund does not declare a dividend; one can withdraw 0.75% of net asset value under the Automatic Withdrawal Plan.
WF: How should distributors position your Balanced Fund and your Balanced Advantage Fund and how do you recommend they determine suitability of each for investors?
Naren: By its construct, ICICI Prudential Balanced Advantage Fund is likely to perform well at a time when the markets are more volatile and is likely to deliver lower absolute return while Balanced Fund is likely to do better when the markets do well. The key difference between the two is in terms of the equity exposure taken. In ICICI Prudential Balanced Fund, the equity exposure is maintained between 65-80%, while in case of ICICI Prudential Balanced Advantage Fund, the equity levels can be between 30-80%.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
The information contained in this communication is only for the reading/understanding of the registered Advisors/Distributors. 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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Fund Focus: ICICI Prudential Balanced Fund
