Thematic funds are positioned as alpha generating satellite holdings in investor portfolios with the onus on the investor and his guide to make nimble entry and exit decisions.
This inhibits thematic funds from being recommended for SIPs and for core holdings – both of which are key to building scale in these funds.
ICICI Pru’s Thematic Advantage Fund (TAF) is a fund of funds solution where the fund house takes on the onus of nimble tactical macro environment based entry and exit decisions across its range of thematic funds with a totally benchmark agnostic approach, thus capturing the alpha potential of themes while steering clear of them in challenging macro environments.
Beyond the range of thematic equity funds, tactical calls can include cash calls where appropriate (through short/ultra short debt funds) as also overseas funds where appropriate.
TAF today has a 65% tilt to defensives (which includes 17%in short term debt funds and the balance split between healthcare and consumption) and 35% towards cyclicals (only in BFSI where prominent allocations are in reasonably valued large banks).
With no allocations currently in infrastructure and manufacturing and a pronounced defensive slant, TAF mirrors the AMC’s current cautious stance on markets.
A key differentiator between TAF and ICICI Pru’s popular Business Cycles Fund is that the former is a lot more tactical while the latter tends to stay invested in business segments for their entire upcycle.
TAF’s performance over the last 6 years of its existence (in its current avatar) has delivered healthy alpha as well as superior risk adjusted returns, underscoring the value of this innovative solution from the fund house.
TAF opens up thematic funds to long term SIPs as well as buy-and-hold core holdings in portfolios – investors can participate in tactical thematic alpha plays with the comfort of knowing that the fund house will take all the tactical bets on their behalf.