Lahar Bhasin finds that the fund, true to its name, changes the asset allocation and follows an opportunistic market cap strategy
ICICI Prudential Dynamic Plan is a diversified equity fund which retains the flexibility of moving its entire asset base into cash, the valuation of the markets necessitates such a move. Therefore, in case, the fund manager perceives the market to be overvalued and hence heading for a correction in the near term, assets will be moved into cash or derivative contracts. Apart from this the fund invests across market caps and sectors without any bias.
Resurgence
The fund has re-entered the recommendation list of most advisors after its recent improvement in performance. In 2006 the fund delivered triple digit returns, only to put up a dismal performance in 2007. This was followed by a better performance since 2008. While the inconsistency in returns is a little disconcerting, the return card over the long term is reassuring. Over the shorter term, the fund has had its patches of disappointing performances. Over the long term, the fund has performed better in times of a market slide rather than in bull phases.
Following the elevation of Mr. Sankaren Naren to the CIO’s post, Mr. Sanjay Parekh has taken over the fund management from February 2011. Mr. Parekh has been managing funds such as ICICI Prudential Power and ICICI Prudential Equity Opportunities for the past three years. In case of ICICI Prudential Power, Mr. Parekh has managed to outperform the Nifty over the past year.
|
Period |
ICICI Prudential Dynamic |
Nifty |
|
3 Month |
-2.41 |
-5.15 |
|
1 Year |
12.28 |
7.25 |
|
3 Year |
13.19 |
4.79 |
|
5 Year |
15.57 |
11.33 |
|
Inception |
30.15 |
|
|
Returns as of 28th March 2011. Returns less than 1 year are absolute, while greater than 1 year are annualized. | ||
|
Source: |
Accord Fintech | |
Dynamism
The style of management is a curious mix of a defensive strategy coupled with short term opportunistic bets. A macro look at the average equity allocation over a medium term would peg the fund as defensive. Very rarely will you find the fund investing over 90 per cent of its assets in equity. However, a micro look reveals that the ‘dynamic’ streak of the fund cannot be ignored. So don’t be alarmed if the fund statement over a quarter shows that the equity allocation has swayed from 78 per cent to 90 per cent, only to settle back at 77 per cent.
Moreover, this dynamism extends beyond asset allocation to the market capitalization strategy of the fund. In the past, the fund has tried to improve returns by investing a considerable amount in mid and small cap stocks in the midst of a bull phase. You can also expect the fund to take concentrated bets on individual stocks.
Over the short term of one-year, the fund’s returns have been amongst the least volatile in the diversified equity space. Over the longer term of three and five- years, this volatility does increase. However, it continues to be much below the average diversified equity fund.
Investor Suitability
The asset management company recommends the fund for conservative investors with a long term investment horizon. Given the low volatility in returns coupled with downside protection, this would be accurate.
