ICICI Pru assuages investors on fund manager's exit

There are 51 stocks now and nearly 95% of the assets are in giant large-cap stocks

Earlier this month, Manish Gunwani, deputy chief investment officer (CIO) at ICICI Prudential Mutual Fund, quit the fund house. He'd managed Focused Bluechip Equity since January 2012 and the move worried its investors; the fund has assets of Rs 13,500 crore.
 

Sankaran Naren, the CIO, and Rajat Chandak have been asked to now manage the scheme. Some investors and distributors are worried due to Gunwani’s and Naren’s different styles of functioning.  Naren is known to have a conservative and contrarian style; Gunwani was a bit more aggressive.

Focused Bluechip was launched during one of the toughest phases of the Indian stock markets, in May 2008. The benchmark Sensex on the BSE had slipped to 8,000, from a high of 21,000. The fund also went through a difficult phase, its underlying assets fast declining. It saw a shuffling of fund managers. 

However, it recovered in due course and, at present, has given an annualised return of 15.5 per cent since launch. If an investor had started a systematic investment plan (SIP) of Rs 1,000 since its launch, his total cost of Rs 1.1 lakh would have turned to Rs 2.47 lakh by now. Further, over the five years since Gunwani was in charge, the scheme has returned a robust compounded annual growth rate (CAGR) of 18.37 per cent, beating its benchmark by a little over 450 basis points. More, in the past three years, the outperformance was about 4.5 percentage points.

Naren, also executive director at ICICI Prudential MF, says investors shouldn’t be perturbed by Gunwani's exit, as the fund follows a “strong process-driven investment strategy”.

“ICICI Prudential Focused Bluechip Equity Fund (the Scheme) is managed within a tight investment strategy which aims for sector deviations of 5 per cent plus or minus of benchmark weightage. The scheme intends to invest in high conviction picks selected from top 200 stocks listed on NSE using bottom up approach. The Scheme is being directly managed by me and Rajat Chandak is co-manager. The scheme aims to follow the same strategy in the future as well,” says Naren.

This is evident in the portfolio construction. There are 51 stocks now and nearly 95 per cent of the assets are in giant large-cap stocks, one of the largest in large-cap schemes, with the top 10 stocks being nearly half the scheme’s total assets. They include HDFC Bank, ICICI Bank, State Bank of India, ITC, Maruti Suzuki, Infosys and Axis Bank.

Naren, further adds, “At ICICI Prudential Mutual Fund we have a well thought out investment process which has evolved over a period of time and is firmly institutionalised. We believe that having a robust process is what matters the most. Our internal analyst team creates a model portfolio which acts as a guiding factor for the fund manager. Our endeavour will be to ensure that investment experience remains at the core. Investors need not worry as this Scheme will continue to stick to its decade old strategy and processes,” adds Naren.

Independent experts say they agree. Kaustubh Belapurkar, director (fund research) at Morningstar India, says: “hough  Gunwani was the schemes’ face, a strong investment team backed the the fund. ICICI Pru has also put in robust in-house processes. The scheme has not been over-ambitious but steady in performance. We have observed that scheme does not tend to deviate a lot from the benchmark and stays away from taking a large sectoral exposure.”