Riding higher on equities

Launched in March 2004, ICICI Prudential MIP 25 is classified under the MIP aggressive category of CRISIL Mutual Fund Ranking. The fund has been consistently ranked in the top 30 percentile (CRISIL Fund Rank 1 or 2) over 12 quarters ended December 2017.

The fund's objective is to generate income through investments, primarily in debt and money market instruments. As a secondary objective, it also seeks to generate long- term capital appreciation from the portion of equity investments. The fund's quarterly average assets under management (AUM) stood at ~1,458 crore as of December 2017.

Consistent outperformance

The fund has consistently outdone its benchmark (CRISIL MIP Blended Index) and category (schemes defined under the MIP Aggressive category of CRISIL Mutual Fund Ranking) across all trailing periods under analysis.

Over the past one year, the fund delivered 10.94 per cent absolute returns comfortably outperforming its peers (9.04 per cent) and the benchmark (7.09 per cent).

An investment of ~1,000 in the fund at the time of its launch would have grown to ~3,960 at a CAGR of 10.46 per cent, substantially higher than the benchmark's ~2,927 at 8.07 per cent and the category's ~3,533 at 9.55 per cent.

A systematic investment plan ( SIP) is a mode of investment offered by MFs to retail investors through which one can invest a certain amount, at a regular interval. An SIP of ~1,000 per month in the fund since its inception has outperformed a similar investment in its benchmark across periods.

Duration management

On average, the fund has maintained higher duration than peers over the past three years ended December 2017.

The fund's duration calls have seen some hits and misses. It maintained higher duration relative to peers from April 2015 to April 2016, when yields declined about 30 bps. This was favourable for the fund owing to the inverse relationship between yields and bond prices. Subsequently, when yields rose by about 81 bps over the past year, higher duration dampened the fund's performance.

Portfolio analysis

In line with its objective, the fund's portfolio constituted primarily of debt instruments (73.20 per cent), followed by equity (23.37 per cent) and cash.

The debt exposure was predominantly to sovereign and high-rated corporate instruments (64 per cent on average). The fund took minimal credit exposure (sub-AAA/A1+ exposure below 9.00 per cent) during this period, lower than that taken by its peers (13.55 per cent). Over the past three years ended December 2017, the fund took higher exposure to equity (23.13 per cent), on average, compared with peers (22.27 per cent). Equity exposure in the past year was higher at 24.76 per cent, which benefitted the fund owing to the rally in the equity market, which returned 28.65 per cent (Nifty 50) during the same period.