Amidst the economic slump during the COVID-19 crisis, the equity market witnessed several sectors such as Pharma and IT outperforming in a short span of time. Now with the domestic economy showing signs of revival and expectation of further growth, depressed sectors could make a comeback and the market could soon witness new sectoral leaders.
Such shift in business cycles can provide room to identify investment opportunities across sectors/themes/market caps.
ICICI Prudential Business Cycle Fund, the latest offering from ICICI Prudential AMC will aim to identify wealth creation opportunities from such business cycle shifts.
Mr S Naren, ED and CIO of ICICI Pru AMC is of the view that for the next 10 years central banks and macro trends will drive the market, which makes business-cycle oriented investing the way forward.
As a thematic fund, ICICI Pru Business Cycle Fund has a mandate to invest minimum 80% of its assets in equity & equity related instruments following business cycles based investing theme. The performance benchmark index of the fund is Nifty 500Total Returns Index.
ICICI Pru Business Cycle Fund is an open-ended equity scheme that will seek to generate long-term wealth creation by investing Indian markets with the focus on riding business cycles through dynamic allocation between various sectors and stocks at different stages of business cycles. However, there is no assurance or guarantee that the investment objective of the scheme will be achieved.
Table 1: Details of ICICI Pru Business Cycle Fund
|Type||An Open ended Equity Scheme following business cycles based investing theme||Category||Thematic Fund|
|Investment Objective||To generate long-term capital appreciation by investing with focus on riding business cycles through allocation between sectors and stocks at different stages of business cycles. However, there can be no assurance that the investment objective of the Scheme will be achieved.|
|Min. Investment||Rs 5,000 and in multiples of Re 1 thereafter||Face Value||Rs 10/- per unit|
|Entry Load||Not Applicable||Exit Load||
||Benchmark Index||Nifty 500 (Total Returns Index)|
|Issue Opens||December 29, 2020||Issue Closes||January 12, 2021|
(Source: Scheme Information Document)
Investment strategy – ICICI Pru Business Cycle Fund
ICICI Pru Business Cycle Fund will invest predominantly in equity and equity related securities with a focus on riding business cycles. It will invest dynamically across various sectors and stocks at different stages of business cycles.
The scheme will aim to identify economic trends and invest in the sectors and stocks that are likely to outperform at any given stage of business cycle (i.e. the expansion or contraction phase). It will utilise pure top-down approach based on various macro indicators – inflation, growth, deficit, etc.
The fund manager will consider the following economic parameters to decide on the expansion or contraction phase:
- Current Account Deficit, fiscal deficit, interest rates, inflation
- Investment indicators (investment in capex, new projects cleared, etc.)
- Business and consumer sentiment (purchasing manager index, business confidence index, sales of various consumer discretionary products, etc.)
For instance, during economic slump the scheme’s portfolio will be tilted towards defensive sectors such as Pharma and IT, whereas during economic boom it will shift focus to cyclical sectors like Bank, Real Estate, and Capital goods.
After identifying sectors based on the Business Cycle, the fund will select stocks based on various financial parameters. The scheme will conduct a periodic/event based assessment of the macro-economic environment to identify opportunities.
Under normal circumstances, the fund’s asset allocation pattern will be as under:
Table 2: Asset Allocation of ICICI Pru Business Cycle Fund
|Instruments||Indicative Allocation (% of assets)||Risk Profile|
|Equity and Equity related instruments selected on the basis of business cycle||80||100||High|
|Other Equity and equity related instruments||0||20||Medium to High|
|Debt securities and money market instruments, including Units of Debt oriented mutual fund schemes||0||20||Low to Medium|
|Preference shares or any other asset as may be permitted by SEBI from time to time||0||20||Medium to High|
|Units of REITs & InvITs||0||10||Medium to High|
(Source: Scheme Information Document)
The scheme can invest a portion of its assets in other equity and equity related instruments, derivatives, foreign securities, American Depository Receipts, Global Depository Receipts, units issued by REITs & InvITs, debt and money market instruments, units of mutual funds managed by the AMC or schemes of any other mutual funds.
Who will manage ICICI Pru Business Cycle Fund?
Mr Anish Tawakley and Mr Ihab Dalwai will be the fund managers of the scheme while Mr Manish Banthia will be the co-fund manager involved in identifying business cycles. Ms Priyanka Khandelwal will be the dedicated fund manager for overseas investments.
Mr Anish Tawakley is a Fund Manager and Head of Research at ICICI Prudential AMC Ltd. He is a PGDM (MBA) from IIM Bangalore and B.Tech (Mechanical Engineering) from IIT Delhi. Anish joined ICICI Prudential AMC in April 2016 and has over 24 years of experience in equity research. In the past, he has worked with Barclays India, Credit Suisse India and Alliance Bernstein (UK).
Anish currently manages ICICI Pru Bluechip Fund, ICICI Pru Bharat Consumption Fund – Series 1, ICICI Pru Bharat Consumption Fund – Series 3, ICICI Pru Manufacture in India Fund, and ICICI Pru MNC Fund.
Mr Ihab Dalwai is a Fund Manager at ICICI Prudential AMC Ltd.He is a CFA, CA, and BCom. He started his career with ICICI Prudential Asset Management Company Limited in April 2011. Prior to his present role, he was working as an Investment Analyst in the MF Equity, sub – department of Investments.
Mr Manish Banthia is Senior Fund Manager – Fixed Income at ICICI Prudential AMC. He joined the fund house in October 2005. Mr Banthia is an MBA and Chartered Accountant by qualification. Prior to ICICI Prudential AMC, he was associated with Aditya Birla Nuvo Ltd. and Aditya Birla Management Corporation Ltd.
Manish is responsible for the debt investments of several debt-oriented scheme of ICICI Prudential Mutual Fund, including ICICI Pru Regular Savings Fund, ICICI Pru Equity Savings Fund, ICICI Pru Balanced Advantage Fund, ICICI Pru Ultra Short Term Fund, ICICI Pru Credit Risk Fund, among others.
Ms Priyanka Khandelwal is dedicated Fund Manager for Overseas Investment at ICICI Prudential AMC. Her qualifications include CA, CS, CFA – Level 2, and BCom. She joined ICICI Pru AMC in October 2014.
Priyanka is the fund manager of ICICI Prudential Global Stable Equity Fund (FOF), ICICI Prudential US Bluechip Equity Fund, and manages the overseas portion of all schemes of the Fund that have a mandate to invest in overseas securities.
Fund outlook – ICICI Pru Business Cycle Fund
The Indian economy is slowly emerging out of the COVID-19 crisis on the back of fiscal and monetary stimulus. Furthermore, with COVID-19 cases subsiding in India and vaccine approval, demand is set to revive and therefore corporate earnings could see growth. Thus, the Indian economy is expected to do well.
However, global growth could be neutral due to the second wave of COVID infections in select developed countries.
Thus, at present ICICI Pru Business Cycle Fund will invest predominantly in domestic cyclicals such as Banks, Capital goods, Metals, Infrastructure, and Real Estate. The performance of the scheme will depend on the fund manager’s ability to identify business cycle shifts at the right time and swiftly move between sectors/business expected to benefit from it.
The fund will invest across the three to five sectors expected to gain based on the prevailing business cycle. Such concentrated exposure towards few sectors makes it a risky proposition.
You can consider investing in ICICI Pru Business Cycle Fund if you can handle market volatility and have long-term investment horizon of 5-7 years.
This article first appeared on PersonalFN here