ICICI Prudential Mutual Fund Archives

ICICI Mutual Fund, ABSL MF come with new target maturity debt funds

ICICI Prudential Mutual Fund has announced the launch of ICICI Prudential PSU Bond plus SDL 40:60 Index Fund -â€“ Sep 2027, a target maturity index scheme investing in the constituents of Nifty PSU Bond Plus SDL Bond Sep 2027 40:60 Index. On the same day, Aditya Birla Sun Life AMC announced the launch of Aditya Birla Sun Life Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund. It is an open ended scheme tracking the Nifty SDL Plus PSU Bond Sep 2026 60:40 Index. Here we take a detailed look at both the NFOs.

ICICI Pru PSU Bond plus SDL 40:60 Index Fund -â€“ Sep 2027

In the portfolio, the proportion of investment into AAA rated bonds issued by government owned entities and SDLs will be in the ratio of 40:60. The bonds which will be a part of this portfolio will be maturing during the six month period ending September 30, 2027. The index will be reviewed every quarter and the weights of each issuer in the index will be capped at 15%.

The Nifty PSU Bond Plus SDL Bond Sep 2027 40:60 Index seeks to measure the performance of portfolio of AAA rated bonds issued by government owned entities and SDLs maturing during the six-month period ending September 30, 2027.

Investors should consider ICICI Prudential PSU Bond plus SDL 40:60 Index Fund as it provides exposure to Government backed instruments like PSUs & SDLs, if held for more than 36 months, tax is applicable at 20% with indexation (excluding applicable
surcharge and cess), can be an alternative traditional investments to park surplus money and to meet a medium term goal in line with the maturity period.

The NFO opens September 16, 2021, and closes on September 27, 2021.

Chintan Haria, Head- Product Development & Strategy, ICICI Prudential AMC said, â€œICICI Prudential PSU Bond plus SDL Bond Sep 2027 40:60 Index is a target maturity open ended fund which provides investors exposure to a portfolio of 8 PSU bonds issued by government
owned entities and 20 SDLs issued by States/UTs. This is suitable for investors seeking exposure to a fixed income instrument and for investors having a medium-term investment horizon in line with the indexâ€™s maturity period.â€

ABSL Nifty SDL Plus PSU Bond Sep 2026 60:40 Index Fund

This debt index fund marks Aditya Birla Sun Life Mutual Fundâ€™s foray into passive offerings in the fixed income space.

This would be an open ended scheme tracking the Nifty SDL Plus PSU Bond Sep 2026 60:40 Index. The NFO opens on September 15, 2021 and closes on September 23, 2021.

The fund has a defined maturity date with a target maturity of September 30, 2026, with a diversified portfolio of AAA rated PSU Bonds and SDLs maturing on or before scheme maturity. Since it is an index fund its portfolio will seek to replicate the performance of Nifty SDL Plus PSU Bond Sep 2026 60:40 Index.
The portfolio index will comprise of 60% SDLs of top 10 states/Union Territories and 40% of top 10 AAA rated PSU bonds curated on the basis of credit quality and liquidity scores. It will endeavor to hold bonds till their maturity with an aim to provide stable and predictable returns. Subsequently, there will be a quarterly rebalancing and review of the index constituents.
The portfolio of ABSL Nifty SDL plus PSU Bond Sep 2026 60:40 Index Fund is designed to mature on 30th September 2026 and currently offers 5 year indexation benefit for investors coming in before 30th Sept 2021.

A. Balasubramanian, MD & CEO, Aditya Birla Sun Life AMC Limited said, “With yields becoming more attractive and inflation numbers cooling, investorsâ€™ real returns have gone up. Investors can potentially benefit from the current steepness in rates with the safety and liquidity of debt funds. In a short and medium term investment horizon, the spreads for 5 years appear attractive, especially for SDLs, compared to G-Secs, mainly driven by higher state borrowings as percentage of overall borrowing. A mix of SDLs and AAA PSU Bonds can provide reasonably better returns along with safety and liquidity of an open ended fund. A roll down strategy is being employed to take benefits of reasonable yieldsâ€.

What are target maturity funds

A target maturity fund has a specified maturity date that aligns with the maturity date of the bonds it has in its portfolio. This helps such funds provide predictive and stable returns. At maturity an investor will get back their investment proceeds.

If the target maturity fund is a passively managed index fund, one can buy and sell any time through the AMC during the tenure of the fund.

Indexation is an efficient way to reduce tax on returns by adjusting it for inflation. Indexation allows an investor to adjust buying price of oneâ€™s investment with inflation, thus making it more tax efficient. It is applied to long term returns on oneâ€™s investments. Higher inflation means higher indexed purchase price, which means lower notional capital gains and lower tax. Long term capital gains are eligible for taxation at 20% post indexation in debt mutual funds if held more than three years.

5 factors that helped ICICI Pru Flexicap Fund NFO collect about Rs 10,000 crore

The NFO saw participation from 4 lakh retail investors and 15,000 distribution partners.

The previous record for highest-ever collection by open-ended equity fund was held by Reliance Natural Resources Fund, which had collected around Rs 5,660 crore.

Let us look at the 5 key factors that drove ICICI Pru MF’s mammoth fund-raising.

1. Flexicap freedom

ICICI Pru Flexicap has a market cap allocation plan of 50-100 per cent for large-caps and 0-50 per cent for mid- and small-caps. But as per its model, the fund may start with 75-80 per cent in large-caps and the rest in mid- and small-caps. From a risk-reward perspective, flexicap funds fall in the middle of the diversified space (moderate) compared to multicap funds. Flexicap funds offer low potential risks relative to investing more in mid- and small-caps. The new flexicap fund offers higher large-cap exposure i.e. more perceived safety at all times.

2. Distribution muscle

ICICI Prudential MF has ICICI Bank has its sponsor, the other one being Prudential. ICICI Bank has arguably one of the most potential distribution platforms in the country. For this NFO alone, 15,000 distributors actively helped. ICICI Bank has over 5,000 branches. That apart, ICICI Pru MF has an investor base of over 7 million. All this mean that selling the NFO through these platforms can bring big results and that has showed up in this NFO case.

3. Switches from existing ICICI Pru funds

Another factor that may have played a big role in the ICICI Pru Flexicap collection are the switches from ICICI Pru MF funds. NFOs usually allow existing investors to switch money between schemes. This may have happened in this case. For the AMC, this ensures two things. One, the NFO gets more money. Two, the assets under management stays in the same AMC instead of going out in the case of redemptions. Given the freedom in the flexicap model, it would have been easier to convince new and existing investors to pump money in the NFO. Typically, thematic NFOs are riskier. But a flexicap structure is much more safe.

4. Track-record

The scheme is being managed by Senior Fund Manager Rajat Chandak and overseas investments will be managed by Fund Manager Priyanka Khandelwal. ICICI Prudential Mutual Fund has one of Indiaâ€™s largest and experienced investment and research team led by S Naren, who is well known for his calls on macros and market cycles. While Naren has beeen around for a long time, in terms of his investment calls he has been a legend of sorts. He called the 2008-09 crash correctly. Over the last 2 decades, the fund-house by the dint of its reputation has garnered Rs 4.3 lakh crore across nearly 70 schemes. So, this would have given an additional comfort to Flexicap fund new investor.

5. FOMO

Indian markets have been performing well. Valuations are no longer cheap. However, stock markets have not corrected despite what naysayers have said. When the Sensex crossed 50,000, people expected markets to crash. That didn’t happen. Covid, slowdown, Fed rate hike, oil prices…almost everything has been hurled at the bulls but markets have stayed their course. Today, the Sensex is pushing 53,000. Hence, Fear Of Missing Out – FOMO – is extremely high. FOMO has played out many times. Yet, many investors have tried to remain sidelines. Thus, when a fund-house with a good vintage comes with a reasonably sound investment strategy in a flexicap fund structure, it is natural that investors suffering from FOMO will try to go all out.

ICICI Prudential Flexicap Fund NFO opens for subscription on June 28

ICICI Prudential Mutual Fund has announced the launch of ICICI Prudential Flexicap Fund, an open-ended equity scheme which aims to provide capital appreciation by investing in equity and equity related securities across market capitalisation, based on an in-house market cap allocation model. The NFO period opens June 28. Let us find out more about this offering.

New fund highlights

NFO period – June 28, 2021 to July 12, 2021

Minimum application amount (including switches) during NFO – Rs 5,000/- (plus in multiple of Re. 1)

Plans – ICICI Prudential Flexicap Fund â€“ Regular Plan & ICICI Prudential Flexicap Fund â€“ Direct Plan

Options – Growth & IDCW

Benchmark Index S&P BSE 500 TRI

Fund manager – Rajat Chandak

Investment approach

ICICI Prudential Flexicap Fund aims to follow a mix of top-down and bottom-up approach to identify opportunities in large, mid and small cap space respectively. The investment universe considered will be the S&P BSE 500. The stock selection can be based on multiple parameters such as company fundamentals, valuations, and so on.

The fund will be guided by in-house market cap allocation model to provide direction and help ascertain the right allocation to various market caps. Further, based on macroeconomic factors and business cycle, the fund manager may fine tune the allocation suggested by the model which will be in line with the SID at all times.

How it works

The Large/Mid/Small cap allocation in ICICI Prudential Flexicap Fund will be assessed and re-balanced on a periodic basis, based on an in-house model and in line with asset allocation of the scheme.

This model comprises of parameters such as valuation, Relative Strength Index Differential, market cap weight as a percentage of total market cap to name a few. Cues from various economic indicators such as business and economic fundamentals driven by in-depth research techniques, employing strong stock selection, long term growth prospects, inflation, current account deficit/surplus, fiscal deficit etc. too can be considered while building portfolio of companies.

How it helps

The idea here is that during volatile times, large caps tend to limit downside and can provide liquidity to the portfolio. On the other hand, with expected economic recovery post the lockdown phase, mid and small caps may be better positioned to capture potential upside in the economic recovery journey.

ICICI Prudential Mutual Fund has one of Indiaâ€™s largest and experienced investment and research team led by S Naren, who is well known for his calls on macros and market cycles.

Flexicap category

There are two dozen flexicap funds in this category. The most prominent funds in this space are Kotak Flexicap, HDFC Flexi Cap, UTI Flexi Cap, ABSL Flexi Cap and SBI Flexicap. Over last 1 year period ended June 8, 2021, Flexicap funds on an average have gained 56 per cent, which is better than largecap funds and many thematic as well as sectoral funds. Over the 3 year period, Flexicap funds have generated 13.12 per cent CAGR, higher than international, tax-saving, and many thematic funds while over the 5 year period, Flexicap funds have clocked 14.3 per cent CAGR. Good flexicap funds act like a sturdy ship to navigate across different weather conditions.

Fund-house speak

Nimesh Shah, MD & CEO, ICICI Prudential AMC said, â€œFlexi cap is one category (as per SEBI Scheme categorisation) among the equity schemes which is the most flexible among the equity scheme offerings. The ICICI Prudential Flexicap Fund has the flexibility to invest across large, mid and small cap space without any restriction.”