WF: The mood among investors is somewhat pessimistic now, with equity and debt fund returns showing scars of market volatility. Why in this context do you believe that Asset Allocator Fund is a good choice now?

Naren: Owing to various global and domestic factors, the equity markets are likely to be volatile. Debt on the other hand is facing a challenging time due to the current multiple credit issuances. In such a scenario an investor may endeavour to invest in a scheme which can make the most of market volatility. This is where ICICI Prudential Asset Allocator Fund comes in.

This scheme endeavours to capture the optimum allocation of Debt & Equity based on the attractiveness of one asset class over the other. The allocation to either of the asset classes is based on an in-house valuation model. More importantly, the right allocation is not only dependent on equity valuation alone, but also considers the opportunities that are available in debt market.

So, at a time when volatility is likely to persist one should aim to invest into a scheme which can manage equity and debt dynamically and follows the buy low sell high strategy of investing.

In House: Equity Valuation Index – Model Followed

Data as on July 31, 2019. The information contained herein is solely for private circulation for reading/understanding of registered advisors/distributors and should not be circulated to investors/prospective investors.

WF: Your presentation brings out some interesting data points of higher-than-market returns with lower-than-market volatility for this scheme over 3 and 5 year periods, whereas one would expect normally to sacrifice some returns for lower volatility. What in your opinion about our markets helps your model to deliver this return profile and how sustainable is this phenomenon, going forward?

Naren: We follow an in-house valuation models which indicates when it is the optimal time to invest (sometimes aggressively) predominantly into equity and debt asset class. Effectively, the scheme’s approach tends to be contrarian in nature, thereby ensuring that the downside is limited while enjoying a margin of safety. Due to this approach, the portfolio volatility tends to be limited and over a complete market cycle the investor experience tends to be good.

WF: Your model has delivered a 12% return on 95% of occasions on a 5 year rolling basis over this decade (2010-2019), with lower than market volatility. That is obviously a very enticing number for long term investors. Going forward, as we ease into a lower interest rate environment, lower inflation environment and therefore lower nominal earnings growth environment, what realistic range of long term returns should investors expect over a 5 year holding period?

Naren: The return trend of the scheme over the years and under varying market condition has been as follows:

• Return Experience in Various Market Conditions

  Source: MFIE & Internal, Past performance may or may not be sustained in future. Data as on 30-June-2019. The performance of the scheme is benchmarked to the Total Return variant of the Index.

• 3-Year Rolling return on Daily Basis

  * * In house equity valuation index model has been used for calculation purpose which is being used for managing ICICI Prudential Asset Allocator fund & from 4th Feb 2019 actual fund NAV has been taken. Past performance may or may not sustain in future. Source: Internal. The above allocation is for understanding the in-house Model. The asset allocation and investment strategy will be as per Scheme Information Document. The performance of the scheme is benchmarked to the Total Return variant of the Index. The performance of the model does not represent the performance of the scheme.

• 5 Year Rolling Return on Daily Basis

  * In house equity valuation index model has been used for calculation purpose which is being used for managing ICICI Prudential Asset Allocator fund & from 4th Feb 2019 actual fund. NAV has been taken. Past performance may or may not sustain in future. Source: Internal. The above allocation is for understanding the in-house Model. The asset allocation and investment strategy will be as per Scheme Information Document. The performance of the scheme is benchmarked to the Total Return variant of the Index. The performance of the model does not represent the performance of the scheme.
  The information contained herein is solely for private circulation for reading/understanding of registered advisors/distributors and should not be circulated to investors/prospective investors.

From the above tabulations, it can be seen that over long term, the fund tends to deliver better risk adjusted returns.

WF: What are the underlying schemes that this Fund of funds scheme invests into and how has the asset allocation across debt and equity moved over the last 3 years?

Naren: The underlying schemes of ICICI Prudential Asset Allocator Fund are ICICI Prudential Large & Midcap Fund,ICICI Prudential Bluechip Fund, ICICI Prudential All Seasons Bond Fund and ICICI Prudential Floating Interest Fund. Allocation to equity has varied over time depending on the market attractiveness as can be seen from the below chart.

Exposure to Equity during Various Market Cycles

* In house equity valuation index model has been used for calculation purpose which is being used for managing ICICI Prudential Asset Allocator fund & from 4th Feb 2019 actual fund NAV has been taken Past performance may or may not sustain in future. Source: Internal. The above allocation is for understanding the in-house allocation model. The asset allocation and investment strategy will be as per Scheme Information Document. The returns are absolute returns. Period considered: March 31, 2010 to July 31, 2019. The performance of the model does not represent the performance of the scheme. The performance of the scheme is benchmarked to the Total Return variant of the Index.
The information contained herein is solely for private circulation for reading/understanding of registered advisors/ distributors and should not be circulated to investors/prospective investors.

WF: The mutual fund industry has a wide range of volatility buster products – a trend pioneered by your ICICI Prudential Balanced Advantage Fund. With so many models and variants that are available to an investor, what in your opinion makes your ICICI Prudential Asset Allocator Fund stand out?

Naren: The aspect that sets the ICICI Prudential Asset Allocator Fund apart from the other schemes in the category is the extent to which it can take equity and debt exposure. In this scheme, based on the market attractiveness, the fund manager can choose to allocate 0-100% in equity or debt, while the other schemes tend to have restrictions in terms of asset class exposure. The second important point to differentiate is the underlying model which is a time tested model and has successfully managed to deliver good investment experience. The third differentiation is with respect to taxation. This scheme has debt taxation, so if the investor has stayed put for three years plus then one can get indexation benefits.

Disclaimer & Riskometer

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.