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ICICI Pru Focused Bluechip Equity Fund: Nifty hugging approach
Thu, Feb 18, 2016
Source : Jeni Shukla, Citrus Interactive

ICICI Prudential Focused Bluechip Equity Fund is an open-end diversified equity large cap fund. It was launched in May 2008. It is benchmarked against the Nifty 50 Index. The fund has an AUM of Rs. 9,981 crore as on December 31, 2015 which has gone up by Rs. 1,594 crores as compared to a year ago (Rs. 8,387 crore as on 31 December, 2014). It is currently the 8th largest open ended equity diversified fund.

 

Performance

ICICI Prudential Focused Bluechip Equity Fund has done better than its benchmark (Nifty 50) in all the periods (refer table below) except for the year-to-date (YTD) period. It has beaten the entire equity diversified category average in the YTD and 6 months periods. In all the other periods its performance is inferior compared to the category average. Its CAGR return since inception is better than Nifty 50 by 8 percentage points.

Scheme Name

YTD

6 Months

1 Year

2 Years

5 Years

Since Inception

ICICI Prudential Focused Bluechip Equity Fund

-5.04

-10.25

-10.7

17.7

11.3

13.86

NIFTY 50

-4.82

-11.36

-14.14

11.48

6.56

5.68

Category Average

-6.12

-10.32

-7.73

24.6

12.2

NA

Rank

40/165

76/161

116/158

115/149

71/137

NA

Figures are in % as on January 31, 2015; Returns above 1-year in Compounded Annual Growth Rate (CAGR)

The fund has beaten its benchmark in all the last 5 calendar years except 2012 (around 1% underperformance). However, it outperformed the equity diversified category average in only 2 years – 2011 and 2013. This could be because in 2014 and 2015 the midcap fund category did much better compared to large cap.

Scheme Name

2011

2012

2013

2014

2015

ICICI Prudential Focused Bluechip Equity Fund

-16.41

26.79

10.21

41.1

-0.21

NIFTY 50

-24.62

27.7

6.76

31.39

-4.06

Category Average

-23.95

34.05

5.43

53.99

3.63

Rank

9/138

114/142

18/146

111/149

118/158

All figures in %

Risk: In terms of standard deviation the fund carried a lower risk compared to the equity diversified category median but in terms of beta, the fund has taken higher risk compared to the category median. The ratios are measured over last 3 years.

 

Standard Deviation

Beta

ICICI Prudential Focused Bluechip Equity Fund

0.93

0.92

Category Median

0.95

0.89

 

Risk-adjusted Returns: In terms of Treynor ratio the fund has a risk-adjusted return equivalent to that of the category median and in terms of Sharpe ratio, the fund has provided lower risk-adjusted returns than the category median. The ratios are measured over last 3 years.

 

Treynor

Sharpe

ICICI Prudential Focused Bluechip Equity Fund

0.06

0.06

Category Median

0.06

0.07

 

Portfolio Characteristics

Sector Concentration:  The fund’s concentration in the top 3, 5 and 10 sectors is higher than the category median.

 

Top 3

Top 5

Top 10

ICICI Prudential Focused Bluechip Equity Fund

49.06

57.93

74.29

Category Median

36.43

49.44

70.09

 

Company Concentration: The concentration in the top 3, 5 and 10 companies in its portfolio is higher than the category median.

 

Top 3

Top 5

Top 10

ICICI Prudential Focused Bluechip Equity Fund

22.39

32.99

50.8

Category Median

18.69

27.5

44.45

 

Number of equity holdings: As the name suggests the fund has a focused approach and hence does not have too many holdings. The fund currently holds 41 stocks in its portfolio (December 31, 2015), which is lower than the median stock count for the diversified-equity category, which currently stands at 45. Over the past five years the fund has had an average stock count of 34.

Cash allocation: Its cash allocation at the end of December 2015 was 3.5 per cent which is on the lower side. The average cash allocation for last five years is 3.4 per cent. Its maximum allocation to cash over last two years was 4.13 per cent in July 2014 and lowest was 0 per cent in March 2015. In 2015 it had an average cash allocation of 1.8 per cent.

Portfolio Insights: The top 5 sector include Private Banks, IT- Software, Pharmaceuticals & Drugs, Refineries and Finance - Investment.

The fund’s exposure to cyclical stocks currently is 63% followed by Defensives with 12% and Services with 17%. The top five holding are HDFC Bank, Infosys, ICICI Bank Ltd., Axis Bank Ltd. and Reliance Industries Ltd.

In the last six months the fund has bought Bank Of Baroda, Titan Company Ltd. and Ambuja Cements Ltd. It has sold its positions in ABB India Ltd., Bharat Forge Ltd., Cairn India Ltd., Eicher Motors Ltd., JSW Steel Ltd., Maruti Suzuki India Ltd., Petronet LNG Ltd., Reliance Capital Ltd. and State Bank Of India.

 

Process

The scheme objective as per the offer document is to generate long-term capital appreciation and income distribution to unitholders from a portfolio that is invested in equity and equity related securities of about 20 companies belonging to the large cap domain and the balance in debt securities and money market instruments.

The minimum equity exposure as per the mandate is 70%. The Scheme may invest in other schemes managed by the AMC or in the Schemes of any other Mutual Funds, provided it is in conformity to the investment objectives of the Scheme.

The Fund Manager will always select stocks for investment from among Top 200 stocks in terms of market capitalization on the National Stock Exchange of India Ltd. The fund mirrors the sector allocation in Nifty with upto 5% deviation. However, the fund manager can pick up stocks outside Nifty 50 within the broad sector allocation. If the total assets under management under this scheme goes above Rs. 1,000 crores the Fund Manager reserves the right to increase the number of companies to more than 20. That explains the higher number of holdings with increasing size.

This fund adopts a bottom-up approach while selecting stocks and the fund manager has the flexibility to choose between stocks across all themes and sectors. The fund has a long term focus with "buy and hold" approach.

The fund’s expense ratio is 1.75% which is much lower than the category average of 2.33%. In fact this is the lowest in the large cap category. Like most equity funds the fund has an exit load of 1 per cent on or before one year from the date of investment. Minimum investment in the fund is Rs 5,000.

 

Fund Manager

The fund is managed by Mr. Manish Gunwani since January 2012.

Manish Gunwani is a Senior Fund Manager and has been with ICICI Pru AMC since June 2010. Prior to that he was Head – India Operations – Vicisoft Technologies Pvt. Ltd. In 2007-08 he worked as a Senior Analyst with Lehman Brothers. He has done B. Tech from IIT Chennai and MBA from IIM-Bangalore. Other schemes managed by him are ICICI Pru R.I.G.H.T. Fund, ICICI Pru Balanced Advantage Fund (equity portion), ICICI Pru Equity Savings Fund Series 1, ICICI Prudential Growth Fund (Series 1, 3 and 7).

 

View

ICICI Prudential Focused Bluechip Equity has done a good job in terms of doing better than Nifty 50.  Its strategy of maintaining the sector allocation (with +/- 5% deviation) as per the Nifty 50 index restricts the fund to some extent. The fund has a lacklustre performance compared to the peer set in recent periods. The YTD performance may have taken a hit due to the fund’s high exposure to banks (28%). This fund is suitable for those investors who want to restrict their exposure to only large cap stocks. The Fund has by and large outperformed the Nifty, that too after adjusting for an expense ratio of 1.73%. Given the mandate of the Fund to limit sectoral variation to +/- 5% of the Nifty sectoral weight, a lot will depend on the skill of the Fund Manager.

To read the previous Citrus Analysis of ICICI Prudential Focused Bluechip Equity Click Here

 
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