ICICI Prudential Focused Bluechip Equity Fund : From an aggressive to a steady performer
At investment-mantra.co.in, we shift our focus from an ELSS Fund – Axis Long Term Equity Fund and quality mid-cap fund HDFC Mid-cap Opportunities Fund to a quality large cap equity fund: ICICI Prudential Focused Bluechip Equity Fund.
ICICI Prudential Focused Bluechip Equity Fund Snapshot
Investment Type: Open Ended Equity Fund
Fund Category: Large Cap
Fund Inception Date: 23-may-08
Closing AUM as on 30-Apr-17: Rs. 13155.67 crores
Fund Manager: Manish Gunwani (Managing this fund from Jan 2012 & Overall 20 years of experience)
About ICICI Prudential Focused Equity Fund
ICICI Prudential Focused Bluechip Equity Fund is an Open-ended equity scheme that aims for growth from a focused and optimally diversified portfolio.It invests in equity and equity-related securities of companies belonging to the large cap domain.
This fund adopts a bottom-up approach while selecting stocks and the fund manager has the flexibility to choose between stocks across all themes and sectors. This strategy has the potential to generate returns from being overweight on certain high conviction stock picks.
- The fund seeks to create reasonable diversification across sectors
- The fund has a long-term focus with “buy and hold” approach
- The large cap companies have proven track record, quality management, and good growth potential.
This product is suitable for investors who are seeking:
- Long-term wealth creation solution
- A focused large-cap equity fund that aims for growth by investing in companies in the large cap category.
Source: ICICI Prudential Mutual Fund Website
This fund originally started with a mandate to invest in about 20 equity and equity related securities and looked to generate long-term capital appreciation. The portfolio was mandated to select stocks from among the Top 200 stocks in terms of market capitalization on the NSE. This fund in the past and now also adopts a bottom-up approach to stock selection and the fund manager has the flexibility to choose between stocks across all themes, sectors and investment styles. The Fund Manager reserved the right to increase the holdings of the fund beyond 20 stocks if the assets managed under the fund grow beyond Rs 1,000 crores. The number of stocks in the portfolio has now increased due to a substantial increase in AUM. The fund follows ‘buy and hold’ approach. However, the fund manager at times takes concentrated bets to generate alpha.
(Source: ICICI Prudential Mutual Fund Website)
Sector Allocation ( April 28, 2017)
The fund began with the investment objective of investing in just about 20 stocks till the time it attained at least Rs 1,000 crore of AUM. Post that with an increase in AUM, the number of stocks in the portfolio has increased.
The fund generally retains nearly 40% of its total investments for over two years. Stocks like ICICI Bank , ITC Bhel, L&T and Infosys Technologies were the one’s fund could manage to pocket at fairly discounted rates in 2008. Similarly, the fund was also proactive in investing in some of the fine blue chips in 2009 at attractive valuations. These include stocks like Bajaj Auto, Axis Bank, Bank of Baroda, Punjab National Bank, Hindustan Zinc.
The fund has a fairly diversified portfolio.Since the launch of this fund, financial services has been the most favored sector for the fund, with an average exposure of almost 31.65% percent as of today. This is followed by the automotive and the technology sector to which the fund has an average exposure of 10.81 per cent and 8.31 per cent, respectively currently.
The fund has been substantially overweight on banking and financial sector as compared to its benchmark. Banking sector allocation is dominated completely by private sector banks on the account of better visibility of earnings. State Bank of India among PSU banks makes to the list with 4.29% allocation.PSU banks at present are surrounded by various negatives due to lingering NPA issues and no pickup in economic activity. A quality institution such has HDFC bank tops the list with 7.3% allocation followed by likes of ICICI Bank and State Bank of India. Bajaj FinServ which has been an outperformer for last few years and a fundamentally strong company finds a place in the financial sector allocation with a substantial 4.03%. Quality growth oriented large caps such as Maruti Suzuki have a substantial allocation with 3.75% highlighting fund manager’s focus on investing in quality growth oriented stocks using a bottom-up approach where the focus is on specific excellent managed companies rather than specific sectors. Consumer non-durable major ITC and I.T major Infosys are other businesses with the substantial fund allocation.
Fund’s exposure to Avenue Supermarts indicates fund manager’s inclination to look at long-term sustainable growth stories. The fund currently has 62.56% of assets allocated to Giant cap while 36.81% of assets allocated to large caps with respect to market capitalization.
ICICI Prudential Focused Bluechip Equity has been an aggressive to a steady performer in the category since its inception outperforming its benchmark (S&P CNX Nifty) on a 1 year, 3 years, 5 years and since inception. A CAGR (%) of 15.07 since inception is an excellent performance by the fund given the fund mandate to investment in the large cap universe. An investment of Rs 10000/- on inception would have grown to Rs. 35070/- as on April 30, 2017.
The fund started with a bang in the year 2009 returning 91.19% as against 77.20% by Category (Large-cap). The following year outperformance continued with fund returning a solid 27.07% as against 16.70% by Category (Large Cap). Fund performed relatively better in testing times of the year 2011 when it faired better than Category (Large-cap) returning -16.41 against -24.48 by Category (Large-cap). Since then it has matched more or less Category (Large-cap) on the performance front and hasn’t outperformed by a substantial margin.
|Particulars||1 year||3 year||5 year||Since inception|
|CAGR (%)||CAGR (%)||CAGR (%)||CAGR (%)|
|Nifty 50 Index(Benchmark)||18.58||11.60||12.14||7.32|
Other funds in the category such as SBI Bluechip Fund, Birla Sun life Equity Fund and Kotak Select Focus has given this fund a good fight. The fund does have some bouts of underperformance as compared to peers but over a long term period, the fund has managed to generate reasonably good returns. Fund has shown good turn around in the last one year though it lags its peers such as SBI Blue Chip Fund and Kotak Select Focus Fund over a 3-year period and a 5-year period. Investors investing in the fund should ideally resist the temptation to switch from this long-term performer to peer funds who have outclassed it over a short term.
|Scheme Name||1-year return(%)||3 Years return(%)||5 years return(%)|
|Birla SL Frontline Eqty-Direct (G)||25.4||59.3||193.5|
|HDFC Top 200 Fund (G)||34.20||47.9||132.5|
|Kotak Select Focus Fund – Direct (G)||34.8||86.3||29.88|
|SBI Blue Chip Fund (G)||21.0||71.8||169.5|
|Franklin India Bluechip Fund||21.4||53.5||117.7|
|UTI Opportunities Fund (G)||20.0||39.0||102.4|
Facts and Figures
If you would have invested via SIP in ICICI Prudential Focused Bluechip Equity – Regular Plan (Growth) of 5000 per month since its inception till date (May 28, 2008 to April 28, 2017) , your investments of 4,85,000 would have translated to corpus of 9,06,910 today giving handsome SIP Returns (CAGR) of 15.34%.
A beta of less than 1.0 indicates that the investment will be less volatile than the market, and, correspondingly, a beta of more than 1.0 indicates that the investment‘s price will be more volatile than the market. Fund’s beta of .86 indicates superior risk-reward ratio.
Standard Deviation (%) – 14.10
3 year Sharpe Ratio – 0.69
3 year Beta – 0.97
Average P/E: 22.41
Price to Perspective Earnings stands at 18.72 as against 18.26 of benchmark
Common Pitfalls to avoid
1. Don’t compare returns of a large cap fund and a midcap, smallcap or a microcap fund at any given point of time. It’s like comparing apples to oranges.
Performance returns as on May 18, 2017
|Mirae Emerging Bluechip Fund (G) – Small and Midcap Fund||ICICI Pru Focused Bluechip Equity (G) – Largecap Fund|
For instance, if you compare a small and midcap fund with a largecap fund, purely based on returns you will be tempted to switch to a small and midcap fund. As an investor you must remember that different fund categories have different risks associated with them and as an investor are you willing to take that risk and can you handle the volatility associated with that fund type? Think and then take appropriate decision. Largecap funds provide much-required stability to your overall portfolio in the long term, especially during a bear phase.
Below comparison sounds more logical:
Performance returns as on May 18, 2017
|SBI Bluechip Fund (G) – Largecap Fund||ICICI Pru Focused Bluechip Equity (G) – Largecap Fund|
2. Be patient with your largecap funds. There can be instances while investing in a largecap fund that there can be a prolonged period of underperformance. So at times, you need to be very patient and have complete faith in your investment decision.
For instance, below is what investment in a largecap fund such as Franklin India Bluechip would have fetched you over an eighteen year period:
Investment Amount: 5000 per month
SIP Frequency: Monthly
Returns Date: From 1 May 1999 to 1 May 2017
Total amount invested: 1,085,000.00
Fund Value: 7,773,702.77
Isn’t it amazing – Returns of 19.18% (CAGR). Large cap funds seem to be boring investing in predictable companies but if money can be made by simple way, why complicate it?19.18% (CAGR).
3. Don’t solely rely on star ratings. During your investment journey for the long term, there can be times when a good fund in which you are invested slip down in ratings provided by various websites. Try to dig deep and understand what has caused rating downgrade. If you think this downgrade in star rating is only due to short-term performance and fundamentally nothing has changed as regards fund, avoid switching.
4. ICICI Prudential Focused Bluechip Fund’s consistent returns can be attributed to fund manager’s capabilities. So in the case of fund manager change for whatever reasons, keep fund under watch list and evaluate the performance of the fund over the next few months. There have been funds such as IDFC premier Equity Fund which lost its mojo once fund manager left the AMC.
5. Don’t evalaute fund such as ICICI Prudential Focused Bluechip Fund only by performance in bull phase. In the year 2011, when markets corrected, the fund performed better than the benchmark and controlled the downside – a hallmark of a good fund.
Fund has toned down its aggression over the years and now is a steady compounder with a lot more diversified portfolio as compared to what it started with. Fund currently has close to 61 stock holdings in its portfolio with top 10 equity holding stands at 43.0797%. Fund follows ‘buy and hold’ strategy and invests in quality stocks with stock specific approach rather than sector specific. Consistency in generating steady returns year on year is the hallmark of the fund. The fund’s biggest asset is its fund manager in Mr. Manish Gunwani who has managed fund very well and thus fund has managed to give consistent returns. The fund is, in fact, an ideal large cap fund that invests close to 90% of assets in large cap stocks.
With the economy expected to show meaningful recovery, the fund is best positioned to take advantage of that upside. The fund started with a bang but over the years the fund has blended itself nicely with an increase in AUM. This fund can be part of core mutual fund portfolio inclined towards providing a large cap flavor and committed to long term capital appreciation from investments in handpicked large cap stocks.
Disclaimer: Please consult your financial advisor before taking any investment decisions. The write-up is for information purpose only and is not a recommendation of any sort to the readers. Mutual funds are subject to market risks. Please consult your financial advisor before taking any financial decisions.