Investors who are looking for a truly broad based solution to their investment management needs can look at the Prudential ICICI Dynamic Plan, which was launched in October 2002. The scheme can also invest in debt, money market instruments and derivatives for defensive considerations. However, the fund manager has not yet forayed into the debt market or into derivatives. Being a dynamic equity scheme, the fund can switch entirely from equities to cash in a bearish market or if there is a possibility of major downside in the market. The major advantage is that if equity markets crash, dynamic funds can protect the downside.
Prudential ICICI Dynamic Plan is a diversified equity plan which invests in a diversified portfolio of large, mid and small-cap stocks. The fund has registered an exceptional return of 56.90 per cent (annualised) since inception as against benchmark (S&P CNX Nifty) return of
40.82 per cent. Prudential ICICI Dynamic Plan follows a bottom-up stock-picking strategy and prefers to invest in companies that have the potential to compound their cash flows over the years. The fund has performed handsomely over the longer term horizon, posting annualised returns of 52.31 per cent and 47.56 per cent for the last one and three years compared with the modest 36.04 per cent and 31.09 per cent gains recorded by the benchmark index CNX Nifty 500 over the comparable period.
The Prudential ICICI Dynamic Plan has been a leader within its peer group of diversified equity funds as well recording a return of 52.31 per cent in a one year time period versus the category median of 28.17 per cent. At the same time, in the near term 6 months period, its performance slipped a bit with returns at 28.31 per cent, though better than the category median, is well behind the leaders in this category. The fund has reported a big jump in assets under management that has climbed to Rs 15.3 billion as at December 2006, which more than doubled from the previous year’s level of Rs 7.1 billion.
The equity portfolio of the scheme is well diversified; with around 20 sectors spread over 45 to 50 stocks. The fund has registered beta of 0.91 (a measure of how volatile the returns are) and a Sharpe ratio of -0.60 (an indicator named after the Nobel Laureate William Sharpe, which computes the returns achieved for the unit risk taken by the fund manager), indicating the possibility of a moderate risk and good rate of return.
Taking a look at the fund portfolio, i-flex Solutions, Deccan Chronicle Holdings, ICICI Bank, ITC and Reliance Industries are the top five holdings, which contribute 27.94 per cent to the total portfolio. IT- software, consumer non-durables and industrial products are the top three sectors contributing 38.17 per cent of the overall portfolio. Among the newly listed companies, Tanla Solutions and Parshvanath Developers form a part of the fund portfolio. The fund manager has been fairly consistent with the sectoral allocation of funds, however the IT- Sector contribution to the total portfolio has increased from 14.20 per cent in October 2006 to 20.35 per cent in December 2006, reflecting the fund manager's bullish view on the sector. The top 10 holdings contribute 41.90 per cent to the total portfolio. The fund portfolio is well spread out over larger, mid and small cap stocks.
The fund has added Tata Steel, Federal Bank, Pantaloon Retail, Sterlite Industries and GE Shipping to its portfolio in the month of December 2006 whereas it has exited Uttam Sugar Mills, L&T, BHEL, Tata Power, Apollo Tyres and Power sector from its portfolio in December. The fund manager has booked some profit in Triveni Engineering & Industries, Century Textiles & Industries and ITC in the month of December 06. This may be on account of profit booking, as market gained new highs in the last quarter and fell sharply in December. The fund increased its average equity exposure to 97 per cent during the month. Exposure to Banks, Ferrous Metals (Tata Steel) and Petroleum Products (Reliance Industries) was increased. The fund booked profits in Auto/Auto Ancillaries and Capital Goods as well.
The fund is managed by Mr Sankaran Naren, who is a B.Tech from IIT, Madras and holds a PGDM from IIM Calcutta. When queried by myiris about the asset allocation strategy keeping in mind the present high valuation of the market, Mr. Nilesh Shah, Chief Investment Officer, Prudential ICICI Mutual Fund said that the fund could plan to move gradually into cash and other fixed instruments based on the market valuations.
Commenting on the fund focus, he said that their allocation strategy is generally based on liquidity in the market, return potential and market valuation at that time. He further added that they are fairly unbiased as far as larger, mid and small cap stocks go and right now do not have any plans to change the mix. Any change in the weightage of fund allocation to large, mid and small cap stocks is generally based on the particular segment’s performance, he added.