A good defender
If you are looking for a fund that would defend your portfolio well, ICICI Pru Dynamic will fit your requirement. The fund managed a good 27 percent annual return since its launch in October 2002, way ahead of the 14.4 per cent return of its benchmark S&P Nifty. This outperformance is noteworthy as the fund, often times, shifted a good chunk of its assets to debt when equity valuations seemed high.
Although an equity fund, ICICI Pru Dynamic’s mandate allows it to move even 100 percent of its assets into debt or cash or hedge the portfolio using derivatives. The fund takes this call based on market valuations.
Suitability
If you scout for funds using the toppers’ list of the one-year performance chart, you will not find ICICI Pru Dynamic. Simply, put, this is not a fund for return chasers. This fund will fit your bill if you want to be wary of over-valued market conditions, wish to contain falls in a down market and be able to spot opportunities even the market takes a beating.
But this approach would often mean reducing equity exposure when other equity funds are invested to the hilt or going underweight on a sector that has premium valuations, when peers hold on to it.
This fund can work for you in combination with other equity funds as it can provide market-beating returns and at the same time provide some hedge in a bear market. While we normally recommend SIP route in equity funds, it may not be too risky to take small lump sum exposure to ICICI Pru Dynamic as it tries to time the market for you based on valuations. When markets are expensive the fund will likely move to cash, ensuring that you do not get hurt, even if you time your entry in the market peak.
Performance
ICICI Pru Dynamic’s five-year point-to-point returns at 9 per cent annually may seem unimpressive although it is 4 percentage points higher than its benchmark. Yes, it is lower than the 11-percent return managed by established diversified peers such as Quantum Long Term Equity or Reliance Equity Opportunities. But then, ICICI Pru Dynamic’s returns deviate far lesser from its average compared with peers. That means its returns swing less.
For instance, while Reliance Equity Opportunities fell 55 per cent in the 2008 market rout, ICICI Pru Dynamic contained the fall to 45 per cent. This was possible because, by December 2007, the fund had pruned its exposure in equities to 84 per cent. The fund is also adept at upping exposure to equities as seen after the 2011 volatility.
By end 2011, the fund was 92 per cent invested in equities as against 83 percent in June 2011; although market confidence in equities was at a low.
But then, in a market upswing such as the one in 2012, while it beat equity category average, it could not rally as much as top peers. But its returns in 2012 were as much as Quantum Long Term Equity. The fund’s rolling one-year returns over a three-year period was 17 per cent. That is higher than the 11.7 per cent return (rolling basis) managed by FT India Dynamic PE FoF – another fund that takes valuations calls. The latter though, acts more like a balanced fund.
Portfolio
As of January ICICI Pru Dynamic was invested only 77 per cent in equities, net of the Nifty Futures it held. Clearly, it was uncomfortable with valuations in certain sectors. For instance, while most peers are invested about 20 per cent in the banking and finance space, the fund has been reducing its exposure to this segment over the past few months.
Banking and NBFCs accounted for about 13 per cent of the assets in January. Even within this space, the fund held relatively reasonably valued stocks such as Standard Chartered PLC IDR.
Yet another popular sector that did not receive priority was FMCG. The fund held less than 1 per cent in this sector, clearly staying away from the high valuation in that space.
Sectors such as energy and technology instead received more weights; Cairn India being the stock with the top exposure. While the portfolio is large-cap focused, some of the interesting mid-cap picks include Vardhman Textiles, Balkrishna Industries and FDC.
The fund is managed by Sankaran Naren.
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Hi Vidya,
Could you please clarify as to what the tax treatment for LTCG in such a fund would be? Would it be treated as equity or debt (given that debt exposure may be as high as 100%)?
Thanks,
hari
Hi Hari, The fund is an equity-oriented fund for tax purposes. While it has a mandate to go as high as 100% in debt, only if the average quarterly exposure is less than 65% in equities will a fund be treated as debt fund. So far, ICICI Pru Dynamic has not gone below 70-75% in equities. And even if it does, as long as it ups its exposure soon enough, it will not be a debt fund. Hence, LTCG for the fund is exempt. – rgds Vidya
I have Principal Emerging BlueChip Reg Gr (units 1848.555 @Rs. 27.14 on 05/02/2010) and Principal Large Cap Fund Reg Gr (units 2052.545/Rs. 50,000.00 on 02/02/2010). I think these are not performing well. Where sholud I switch? I do not need these money for next 3-5 years.
Please advise. Kamlesh.
Kamlesh / February 19, 2013
Your comment is awaiting moderation.
I have Principal Emerging BlueChip Reg Gr (units 1848.555 @Rs. 27.14 on 05/02/2010) and Principal Large Cap Fund Reg Gr (units 2052.545/Rs. 50,000.00 on 02/02/2010). I think these are not performing well. Where sholud I switch? I do not need these money for next 3-5 years.
Please advise. Kamlesh.
Hello sir, you may consider investing the money in ICICI Pru Focused Bluechip and HDFC Prudence (balanced fund), given your time frame (we assume 3 years to be conservative). Invest the proceeds from the sale of current funds in liquid funds from the same fund house ICICI PRu Money Market and HDFC Cash Management Savings and then do an STP in to the equity funds. If you need more detailed portfolio planning pl. use the Ask Advisor option (click the help tab on your right once you login to your fundsindia account) giving details about your risk appetite goal etc. This blog typically addresses queries on articles written here. The Ask advisor facility will serve your purpose. tks Vidya
I have Principal Emerging BlueChip Reg Gr (units 1848.555 @Rs. 27.14 on 05/02/2010) and Principal Large Cap Fund Reg Gr (units 2052.545/Rs. 50,000.00 on 02/02/2010). I think these are not performing well. Where sholud I switch? I do not need these money for next 3-5 years.
Please advise. Kamlesh.
Kamlesh / February 19, 2013
Your comment is awaiting moderation.
I have Principal Emerging BlueChip Reg Gr (units 1848.555 @Rs. 27.14 on 05/02/2010) and Principal Large Cap Fund Reg Gr (units 2052.545/Rs. 50,000.00 on 02/02/2010). I think these are not performing well. Where sholud I switch? I do not need these money for next 3-5 years.
Please advise. Kamlesh.
Hello sir, you may consider investing the money in ICICI Pru Focused Bluechip and HDFC Prudence (balanced fund), given your time frame (we assume 3 years to be conservative). Invest the proceeds from the sale of current funds in liquid funds from the same fund house ICICI PRu Money Market and HDFC Cash Management Savings and then do an STP in to the equity funds. If you need more detailed portfolio planning pl. use the Ask Advisor option (click the help tab on your right once you login to your fundsindia account) giving details about your risk appetite goal etc. This blog typically addresses queries on articles written here. The Ask advisor facility will serve your purpose. tks Vidya
Hi,
I want to invest Rs.5000 in equities using SIP method monthly for a long term. But i am confused between ICICI Pru Value Discovery Fund, ICICI Pru Dynamic plan and ICICI Pru Focused Blue chip Equity Fund in growth options. Which one among the three is better? So, which one do you suggest me?
Thanks,
Veera
Hi Veera
Sorry for the delayed response. Please find below the differences.
ICICI Pru Value Discovery Fund -Mid and small cap fund, Aggressively managed fund, more volatility in returns, High Risk/ High return
ICICI Pru Dynamic plan – Flexi cap fund( Invests across Large Mid and Small cap segment, Conservatively managed fund, Less volatility in returns, Moderate Risk/ Moderate return
ICICI Pru Focused Blue chip Equity Fund – Large cap fund, Moderately Aggressively managed fund, Moderate volatility in returns, Moderate Risk/ Moderate return.
If you are conservative investor, Dynamic is better. Moderate means Focused Blue chip, Aggressive means Value Discovery.
Thanks for your reply Mr.Murthy.
I have started investing in Dynamic plan using Sip of 5000 a month. But for diversification, i want to invest 2000 in Sip in another fund. Would you suggest Icici Focused bluechip or Icici value discovery fund? Or from another Fund house.
Thanks,
Veera
Hi Veera,
The blog is meant to be a general discussion forum. I would be constrained from making any portfolio-specific recommendations. If you have your FundsIndia account, pl. use the advisor appointment in the help tab to route your query and our advisors will answer it, first understanding your requirement and your present portfolio. This value add is available free for all FundsIndia investors.
Thank you
Hi Vidya,
Could you please clarify as to what the tax treatment for LTCG in such a fund would be? Would it be treated as equity or debt (given that debt exposure may be as high as 100%)?
Thanks,
hari
Hi Hari, The fund is an equity-oriented fund for tax purposes. While it has a mandate to go as high as 100% in debt, only if the average quarterly exposure is less than 65% in equities will a fund be treated as debt fund. So far, ICICI Pru Dynamic has not gone below 70-75% in equities. And even if it does, as long as it ups its exposure soon enough, it will not be a debt fund. Hence, LTCG for the fund is exempt. – rgds Vidya
Hi,
I want to invest Rs.5000 in equities using SIP method monthly for a long term. But i am confused between ICICI Pru Value Discovery Fund, ICICI Pru Dynamic plan and ICICI Pru Focused Blue chip Equity Fund in growth options. Which one among the three is better? So, which one do you suggest me?
Thanks,
Veera
Hi Veera
Sorry for the delayed response. Please find below the differences.
ICICI Pru Value Discovery Fund -Mid and small cap fund, Aggressively managed fund, more volatility in returns, High Risk/ High return
ICICI Pru Dynamic plan – Flexi cap fund( Invests across Large Mid and Small cap segment, Conservatively managed fund, Less volatility in returns, Moderate Risk/ Moderate return
ICICI Pru Focused Blue chip Equity Fund – Large cap fund, Moderately Aggressively managed fund, Moderate volatility in returns, Moderate Risk/ Moderate return.
If you are conservative investor, Dynamic is better. Moderate means Focused Blue chip, Aggressive means Value Discovery.
Thanks for your reply Mr.Murthy.
I have started investing in Dynamic plan using Sip of 5000 a month. But for diversification, i want to invest 2000 in Sip in another fund. Would you suggest Icici Focused bluechip or Icici value discovery fund? Or from another Fund house.
Thanks,
Veera
Hi Veera,
The blog is meant to be a general discussion forum. I would be constrained from making any portfolio-specific recommendations. If you have your FundsIndia account, pl. use the advisor appointment in the help tab to route your query and our advisors will answer it, first understanding your requirement and your present portfolio. This value add is available free for all FundsIndia investors.
Thank you