Launched in August 2004, ICICI Prudential Discovery is an equity fund with Rs 1,040-crore assets under management as of April 2010. The fund is classified as a small- & mid-cap equity fund and has been ranked ‘Crisil CPR 1’ over the last three quarters ending March.
The consistency in rankings for the fund is an indication of a blend of superior performance and disciplined portfolio management. ‘Crisil CPR 1’-ranked funds form a part of the top 10 percentile of Crisil’s ranked universe.
Performance
Over the recent past, the scheme has benefited from the broad-based rally in the equity market. This is evident from its net asset value (NAV), which has beaten its benchmark index (S&P CNX Nifty) by a wide margin — the fund has appreciated 64 per cent over the last 12 months, whereas the benchmark index has appreciated 14 per cent.
The peer set of small- and mid-cap equity funds, on the other hand, appreciated 41 per cent over the same period.
The scheme performance, since inception, has appreciated over four times. So, Rs 1,000 invested in the scheme would have grown to Rs 4,340 vis-à-vis Rs 3,097 in the benchmark index and Rs 3,356 in the peer set.
The fund’s strong performance on returns has been complimented by a lower volatility vis-à-vis its peer average. The superior performance of the fund on the combination of returns and risk, relative to its peers, is a key factor in propelling its performance to ‘Crisil CPR 1’.
Portfolio diversification
A key attribute of the fund’s portfolio is its diversity and inclination towards mid-cap stocks.
The average number of stocks held over the last three years (ended April) was 39, while the top 10 stocks in the portfolio accounted for not more than 45 per cent of its assets in this period.
Portfolio concentration is a measure of the relative proportions of different securities in a portfolio.
Crisil’s assessment of industry and company concentration of equity funds is critical to assess risk mitigation in portfolio construction.
Sector trends
Over the last three years, the banking sector had the highest average exposure of around 15 per cent. The exposure has, however, reduced from a high of 25 per cent as of January 2009 to 10 per cent as of April 2010. It was closely followed by pharmaceuticals with an average exposure of 13.2 per cent.
Investment style
The fund manager adopts a value-investing style for stock picking. The value philosophy focuses on discovering stocks that have high potential, but are currently lying low at a discount to their inherent value.
Another important aspect of ICICI Prudential Discovery Fund’s investment style was being fully invested across various market phases. By following this strategy, the fund benefited when markets turned around after the correction of 2008, compared to funds that were heavily invested in cash. For most of 2008, when equity markets were volatile, the fund had around 95 per cent of assets in equities and equivalent.
— Crisil Fund Services
