Treading cautiously

FUND PICK: Prudential ICICI MIP

Pru ICICI MIP was launched in October 2000. There is no entry load.

However, the fund charges an exit load of 0.5 per cent for investments up to Rs 10 lakh. The minimum investment is Rs 5,000 and subsequent investments should be in the multiples of Rs 500.

Performance: The fund's lower expenses and risk suggest that its main objective is capital preservation. In the three-year period, its performance has been in the bottom half of the category.

However, its recent performance suggests that its conservatism has paid off in volatile times. Its year-to-date (till October 8, 2004) returns, at 1.83 per cent, is in line with the category average, while for the six-month period it is among the top five funds in the category.

Portfolio: The average maturity of the fund's debt portfolio has never crossed three years. Its average maturity was at its highest during the period from December 2002 to September 2003 (bond yields had almost bottomed out by then).

However, the fund maintained a high quality portfolio. Except during the period between December 2002 and January 2003, it has always maintained a AAA debt portfolio.

At present, AAA and equivalent investments form 79.83 per cent of the portfolio while lower-rated debt instruments account for 7.5 per cent.

The fund rarely came close to its maximum equity allocation target of 15 per cent. The fact that it mostly held 10.6 per cent of its portfolio in equities during the last bull phase implies that the manager failed to capitalise on the equity rally.

At present, it has increased its equity exposure to 12.6 per cent from 9.6 per cent in July. Almost 80 per cent of its equity holdings is in large caps. 
 

Top holdings
As on Sep 30, 2004	Value (Cr)	Net Assets (%)
GoI 2005 6.18%	151.20	13.90
IDBI	63.98	5.88
IRFC	63.12	5.80
Reliance Industries	55.46	5.10
ICICI Bank	50.00	4.60
Treasury bills 364-D 20/08/2005	42.98	3.95
Export-Import Bank	40.26	3.70
Hindalco	36.91	3.39
Corporation Bank	35.00	3.22
GoI 2007 11.9%	34.40	3.16
Citicorp Finance	30.72	2.82
SBI	26.00	2.39
Indusind Bank	25.05	2.30
Punjab National Bank	25.00	2.30
HDFC Bank	24.71	2.27
GoI 2012 7.4%	21.28	1.96
Nabard	20.05	1.84
HDFC	18.76	1.72
Bharti Telecom	15.66	1.44
Grasim Industries	14.35	1.32

Outlook: Among 14 rated MIPs, the fund, with a standard deviation 0.41, stands 11th.

- Value Research