ICICI Prudential Focused Bluechip Equity Fund was launched in May 2008. Within its short history of less than three years, it has been ranked Crisil Mutual Fund Rank 1 for the past two quarters (December and September) in the large cap equity funds category. Also, the fund has been in the top 30 percentile for three consecutive quarters since June 2010. The consistency in ranking is an indication of superior performance and disciplined portfolio management. The fund, which had average assets under management of Rs 1,658-crore as of December, is managed by Prashant Kothari.
Investment strategy
The fund has a mandate to invest in a focused set of around 20 of the top 200 stocks by market capitalisation on the National Stock Exchange. The Fund Manager reserves the right to increase the holdings of the fund beyond 20 stocks if the assets managed under the fund grow beyond Rs 1,000 crore.
An analysis of the fund’s portfolio over the last three years reveals that the average exposure to Crisil defined large cap stocks was a high 96 per cent. In fact, over the last two years, this number has been 100 per cent. This shows that the fund has consistently stuck to its mandate to deliver returns.
Performance
The fund is benchmarked to the S & P CNX Nifty Index and has delivered an annualised return of 56 per cent over the last two years, as compared to 44 per cent returns by the benchmark and peer group respectively, during the same period.
An analysis of the month-on-month performance vis-à-vis the benchmark (S & P CNX Nifty) reveals the fund has beaten the benchmark 68 per cent of the times (22 out of 33 months) vis-a-vis 53 percent of the times by peers (17 out of 33 months). After the market recovery in May 2009, the fund has given an annualised return of 39 per cent vis-à-vis 28 per cent by the benchmark.
Since inception, the fund has outperformed its peers and its benchmark. In absolute terms, an investment of Rs 1,000 in the fund at the time of its launch (May 2008) would have grown to Rs 1,612 as of January 27, 2011 vis-à-vis its peer group which would have grown to Rs 1,204. A similar investment in the benchmark index would have appreciated to Rs 1,133.
Portfolio diversification
The monthly portfolio of the fund, on an average, held 20 stocks since the time of its inception, an indication of the concentration of the portfolio, in terms of exposure per stock. The fund is ranked Fund Rank 5 on both company and industry concentration, indicating a high level of concentration risk.
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Portfolio analysis
Prior to May 2009 (during volatility in the equity markets), the fund maintained a low exposure in equity. Post May 2009, through active cash calls taken by the fund manager, the exposure to cash and equivalents was gradually brought down from 10 per cent (in May 2009) to 4 per cent till December. Thus, the fund was able to capture the uptrend in the equity markets by being almost fully invested.
Since the launch of this fund, financial services has been the most favoured sector for the fund, with an average exposure of almost 30 per cent over this period. The fund has been substantially overweight on this sector as compared to its benchmark. In fact, the exposure to the sector has been more than twice as compared to the constituents of the S&P CNX Nifty. This was followed by the energy and information technology sectors to which the fund had an average exposure of 19 per cent and 13 per cent, respectively. The fund has an overweight position in auto and an underweight position in energy.
The fund follows a combination of a ‘top down’ and ‘bottom up’ approach to investing by focussing its investments on the top 20 stocks on which the fund manager has high conviction of upside potential. An analysis of the last two years of the portfolio of the fund reveals that the stocks retained include Reliance Industries, ITC, BHEL, Bharti Airtel, ICICI Bank, Tata Power and L&T.
—Crisil Fund Services