Welcome to  PersonalFN’s weekly analysis on diversified equity mutual funds! In this issue, we have analysed ICICI Pru Multi Asset Fund, highlighting its performance, peer comparison, investment strategy, fundamentals, portfolio, and suitability.

ICICI Pru Multi Asset Fund is a contrarian style Multi Asset Allocation Fund that has done exceptionally well in the current bull phase. It is the oldest and the most popular fund in the category that has rewarded its investors with superior risk-adjusted returns over the long term.

What is the growth of Rs 10,000 invested in ICICI Pru Multi Asset Fund five years ago?

Past performance is not an indicator of future returns
Data as of April 08, 2024
(Source: ACE MF, data collated by PersonalFN) 

Launched in October 2002, ICICI Pru Multi-Asset Fund is the erstwhile ICICI Pru Dynamic Plan that is now categorised under Multi-Asset Funds. Under its current mandate, the fund aims to provide the agility of equities, regular income through debt instruments, and a hedge against inflation through an allocation in gold. ICICI Pru Multi-Asset Fund invests predominantly in equities, having an average exposure of about 65-70% in the segment.

The fund manager adopts a contrarian approach by remaining underweight in those sectors to which the larger market holds an elevated exposure. Apart from equities, the fund also invests in derivatives, debt and money market instruments, gold (via ETFs and ETCDs), and REITs & InvITs for diversifying the portfolio.

ICICI Pru Multi-Asset Fund has a track record of performing exceptionally well during bull market phases even though it has often struggled during bearish phases. Notably, the fund has registered a growth of 21.5% CAGR since its inception. Its superior performance over various time frames in the past has attracted investors’ attention, making it the largest fund in the Multi-Asset Allocation category.

In the last five years, ICICI Pru Multi-Asset Fund has grown at a compounded annualised growth rate of around 20.2% against a growth of 14.5% in the CRISIL Hybrid 35+65 Aggressive Index. An investment of Rs 10,000 in ICICI Pru Multi-Asset Fund five years back would have now appreciated to Rs 24,903, compared to a valuation of Rs 19,610 in the CRISIL Hybrid 35+65 Aggressive Index.

How has ICICI Pru Multi Asset Fund performed on a rolling return basis?

Scheme Name	Corpus (Cr.)	1 Year	2 Year	3 Year	5 Year	7 Year	Std Dev	Sharpe
Quant Multi Asset Fund	1,829	22.19	18.43	33.01	24.20	18.01	16.03	0.44
ICICI Pru Multi-Asset Fund	36,843	22.65	19.54	26.97	17.58	16.29	9.26	0.53
Tata Multi Asset Opp Fund	2,501	18.00	12.93	19.48	—	—	8.13	0.38
HDFC Multi-Asset Fund	2,642	16.41	11.57	17.27	13.66	11.60	7.07	0.38
Nippon India Multi Asset Fund	2,905	20.16	12.69	17.07	—	—	8.88	0.38
UTI Multi Asset Allocation Fund	1,394	24.30	13.56	15.38	11.13	10.25	8.81	0.37
SBI Multi Asset Allocation Fund	4,230	19.63	12.54	14.56	12.65	11.03	7.25	0.38
Axis Multi Asset Allocation Fund	1,174	10.56	4.91	13.76	12.61	11.34	11.05	0.14
Motilal Oswal Multi Asset Fund	101	13.36	7.22	7.89	—	—	5.26	0.13
CRISIL Hybrid 35+65 – Aggressive Index		15.07	9.61	15.89	12.89	12.55	9.52	0.23

The securities quoted are for illustration only and are not recommendatory.
Returns are on a rolling basis and in %. Direct Plan-Growth option. Those depicted over 1-Yr are compounded annualised. Risk ratios are calculated over a 3-year period assuming a risk-free rate of 6% p.a.
Data as of April 08, 2024
(Source: ACE MF, data collated by PersonalFN)
Please note, this table only represents the best-performing funds based solely on past returns and is NOT a recommendation. Mutual Fund investments are subject to market risks. Read all scheme-related documents carefully before investing. Past performance is not an indicator for future returns. The percentage returns shown are only for indicative purposes.

ICICI Pru Multi-Asset Fund has recorded an extraordinary performance over various time frames in the past. Though the fund underperformed during the market crash of 2020, it made a strong comeback in the ensuing bull phase to stand among the category toppers. In the last 2-year and 3-year period, the fund has outpaced the category average and the benchmark by a margin of around 7-11 percentage points.

Over the longer 5-year to 7-year period too ICICI Pru Multi-Asset Fund stands among the top quartile performers in the Multi-Asset Allocation fund category and has outpaced the CRISIL Hybrid 35+65 Aggressive Index.

With a standard deviation of 9.26%, ICICI Pru Multi-Asset Fund is prone to slightly higher compared to many of its prominent peers. Nonetheless, the superior performance over the years has helped the fund to fare well in terms of risk-adjusted returns as denoted by its Sharpe Ratio of 0.53, which is currently the best in the category.

[Read: How a Multi-Asset Fund Can Protect Your Portfolio at a Market High]

What is the investment strategy of ICICI Pru Multi Asset Fund?

Classified under Multi-Asset Allocation Funds, ICICI Pru Multi-Asset Fund aims to generate capital appreciation and income by investing across asset classes. The fund usually holds 65-80% of its assets in equities, 10-15% in debt and money market instruments, and the balance in Gold ETFs / Exchange Traded Commodity Derivatives (ETCDs), Silver ETFs, and REITs & InvITs, etc.

For the equity portion, ICICI Pru Multi-Asset Fund adopts the ‘bottom-up’ approach to identify companies with above-average profitability supported by sustainable competitive advantages and uses a ‘top-down’ discipline for risk control by ensuring representation of companies from various industries. It also takes exposure to various equity derivatives including futures and options strategies for hedging, portfolio rebalancing, and other purposes.

In the case of debt and money market securities, the fund aims to identify securities that offer an optimal level of yields/returns, considering the risk-reward ratio. The scheme carries out an in-depth credit evaluation of securities to mitigate credit risk. In addition, the fund studies the macro-economic conditions, including the political, economic environment and factors affecting liquidity and interest rates, and positions the portfolio accordingly.

What are the top portfolio holdings in ICICI Pru Multi Asset Fund?

Holding in (%) as of March 31, 2024
(Source: ACE MF, data collated by PersonalFN) 

As of March 31, 2024, ICICI Pru Multi-Asset Fund held 66.2% of its assets in equities. The top 10 stocks in the portfolio together constitute around 31.8% of its assets and contains a good mix of various sectors. The top holdings in the portfolio comprise large cap names (including PSUs) such as ICICI Bank, HDFC Bank, NTPC, Maruti Suzuki India, and Reliance Industries, among others. Many of these stocks have been part of the fund’s portfolio for well over two years now.

ICICI Pru Multi-Asset Fund has benefitted the most from its holdings in NTPC, Bharti Airtel, ICICI Bank, ONGC, Tata Motors – DVR Ordinary, and Sun Pharma that contributed nearly 30% to its absolute returns in the last 2 years. It also benefitted from TVS Motor Company, SBI, Axis Bank, Hero MotoCorp, L&T, Lupin, and Kalpataru Projects International, among others.

ICICI Pru Multi-Asset Fund’s portfolio is currently diversified across a host of cyclical, sensitive, and defensive sectors. Its portfolio is spread across 20+ sectors with the top 10 sectors accounting for 54% of its assets. Banking & Finance stocks form its top holding with an allocation of around 20%, followed by Auto, Power, Petroleum, Infotech, and Pharma, among others.

In terms of debt, the fund invests in low to high-rated corporate debt instruments (current exposure is 5.1%) and sovereign-rated treasury bills and government securities (currently 6.9% of its assets). The average maturity profile of debt instruments is 1 to 2.5 years signifying low interest rate risk. Additionally, the fund held exposure in Gold ETFs, Silver ETFs, REITs & InvITs, etc.

Is ICICI Pru Multi Asset Fund suitable for my investment goals and risk tolerance?

ICICI Pru Multi-Asset Fund has been successful in selecting fundamentally sound undervalued stocks by following a contrarian approach. Since the fund follows a contrarian approach it can witness bouts of underperformance in conditions where growth-oriented funds may be doing well. However, over the long term, it can generate returns that are competitive to its peers and even outpace them.

ICICI Pru Multi-Asset Fund appears to be well placed in terms of its portfolio management strategies. The fund aims to reduce volatility by investing in a well-diversified portfolio of fundamentally sound stocks spread across attractive sectors, with a large-cap bias. If the equity valuations look stretched, the fund has the flexibility to reduce its equity exposure and simultaneously increase exposure to other asset classes such as derivatives, debt, gold, silver, and REITs & InvITs depending on the available opportunities.

ICICI Pru Multi-Asset Fund is suitable for investors looking for a contrarian style Multi-Asset Allocation fund with a long-term view of at least 3-5 years.

Watch this video to find out the 3 best Multi Asset Allocation Funds for 2024:

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

This article first appeared on PersonalFN here