Conservative in risk, consistent in returns

The fund was launched in March 2004 as ICICI Prudential MIP 25 Fund. Subsequent to the re-categorisation of mutual funds by SEBI, it was renamed ICICI Prudential Regular Savings Fund. The fund has featured in the top 30 percentile in the conservative hybrid funds category of CRISIL Mutual Fund Rankings (CMFR) for the two quarters ended September 2018.

Rajat Chandak and Manish Banthia have been managing the equity and debt components of the portfolio since February 2015 and September 2013, respectively. The fund’s investment objective is to generate regular income through investments predominantly in debt and money market instruments. The scheme also seeks to generate long term capital appreciation from the portion of equity investments under the scheme. It’s quarterly average assets under management was ~16.32 billion in the September 2018 quarter.

Good performance

The fund has outperformed its benchmark (CRISIL Hybrid 75+25 - Conservative Index) across the past 1, 2, 3, 5, 7 and 10 years trailing periods and peers (funds ranked under the conservative hybrid category in CMFR - September 2018) across all trailing periods under analysis.

A sum of ~10,000 invested in the fund since inception would have grown to ~40,528 (10.03 per cent CAGR; compounded annual growth rate) on November 15, 2018 compared with ~34,358 (8.80 per cent CAGR) for peers and ~35,132 (8.96 per cent CAGR) for the benchmark.

A systematic investment plan (SIP) is a disciplined mode of investment offered by mutual funds to investors. A monthly SIP of ~10,000 over 10 years (an investment of ~1.2 million) would have grown to ~2.02 million, earning 10.09 per cent per annum as on November 15, 2018. A similar investment in the benchmark would have grown to around ~1.92 million at 9.12 per cent per annum.

Portfolio analysis

During the past three years, the fund has predominantly invested in debt and money market instruments (average 73.16 per cent of the portfolio); the remaining allocation was to equities and cash. The debt portfolio was largely composed of corporate bonds and government securities (G-secs) during this period. Corporate bonds had average allocation of 40.97 per cent and G-secs 32.18 per cent during the period under analysis.

Exposure to the highest rated (AAA and A1+) corporate bonds averaged 22.27 per cent during the past three years. Exposure to AA category and A1 rated debt instruments averaged 13.02 per cent, while exposure to A+/A2+ & below rated debt instruments averaged 5.68 per cent. The fund did not have exposure to the recently downgraded debt instruments of IL&FS during the period under analysis. With the rise in bond yields during the past one year, the fund substantially reduced its modified duration in order to reduce interest rate risk exposure of the portfolio. The fund reduced its modified duration from 5.66 years in October 2017 to 1.71 years in October 2018. Peers reduced their modified duration from 3.94 years to 1.87 years during the same period.