ICICI Prudential Focused Bluechip Equity Fund has been an impressive performer since its launch in 2008. Swapnil Suvarna feels that the fund’s focused bottom up approach has worked well but advises you to be watchful of the fund’s exposure to derivatives
Launched on May 2008 the ICICI Prudential Focused Bluechip Equity Fund benchmarked under S&P CNX Nifty aims to maximize long term capital gains by investing in equity and equity related securities of about 20 scrips from among the Top 200 stocks in terms of market capitalization on the NSE and the balance in debt securities and money market instruments. Furthermore, the fund manager reserves the right to increase the number of companies to more than 20 if the total asset under management (AUM) under this scheme goes above Rs 1,000 crore. The fund portfolio is being managed by Prashant Kothari since its launch.
Performance Analysis
Even though the fund has seen a lot of volatility in its relatively short life of three years, it has done well in both the up and down phases. The fund has managed to register a compounded annualized return (CAGR) of 16.32% against its benchmark (2.64% CAGR during the same period) since inception.
|
Period |
NAV (Rs) |
S&P CNX Nifty |
|
3-mths |
3.62% |
1.64% |
|
6-mths |
-8.81% |
-11.82% |
|
1-Yr |
15.48% |
8.19% |
|
2-Yrs |
23.56% |
12.35% |
|
Since Incp |
16.32% |
2.64% |
|
Returns as of 25th May 2011. Returns less than 1 year are absolute, while greater than 1 year is annualised. | ||
Although the period is short enough to judge the performance of systematic investment (SIP) in this fund, an investor who has been SIP-ing from the start would have generated exceptional yields (47.72%).
Portfolio and Strategy Analysis
Investing in value stocks, low churn in stocks and stability in holdings are the key characteristics of the fund. Another significant thing is that the fund has consistently stayed invested in S&P Nifty index derivatives. The fund management believes that index derivatives are more liquid and provides better liquidity to the portfolio though there is no additional alpha to the investor. As a tactical move, the fund at times has been also investing in derivatives of equities which are already part of the portfolio mainly to take advantage of lower priced futures over cash stock.
The fund since inception has allocated significant portion of its assets in the banking and IT-software picks, followed by Reliance Industries, Bharti Airtel and ITC Ltd. The consistency in the level of exposure to the top stocks picks in terms of holdings reflects the management’s confidence on its pickings for the long term. For instance, the fund manager is bullish on the prospects of Bharti Airtel which was battered during the 2009 rally.
|
Top 5 Holdings Since Inception | ||
|
Scrips |
Industry |
Avg Holding (%) |
|
S&P CNX Nifty |
Index |
9.14 |
|
Reliance Industries Ltd. |
Refineries |
7.51 |
|
Bharti Airtel Ltd. |
Telecom |
6.59 |
|
ITC Ltd. |
Cigarettes |
5.48 |
|
Infosys Technologies Ltd. |
IT - Software |
5.29 |
The fund strategy is to explore better stocks within a sector rather than taking big sector calls and betting heavily on them. However, during the March 2009 rally the fund management let pass the gains of stocks like Maruti Suzuki, Tata Motors and State Bank of India as they had got rid of them earlier in the rally.
Overall, the bottom up approach adopted by the fund management has helped it identify bargain stocks with promising potential for long term growth.
Our view
We recommend this fund as a long-term investment though we would advise you to be cautious about the fund’s exposure towards index derivatives.
