ICICI Pru Corp Bond Fund: Conservative approach, consistent performance

ICICI Prudential Corporate Bond Fund, launched on April 5, 2011, has featured in the top 30 percentile of the corporate bond funds category of CRISIL Mutual Fund Ranking (CMFR) for three consecutive quarters through September 2021. The scheme managed by Rahul Goswami, Chandni Gupta and Anuj Tagra since October 2017, August 2016, and March 2020, respectively, has seen month-end assets under management (AUM) increase to Rs 19,656 crore in November 2021 from Rs 3,428 crore in December 2018. The investment objective of the scheme is to generate income through investing predominantly in AA+ and above rated corporate bonds, while maintaining the optimum balance of yield, safety and liquidity.

Good show

The fund has consistently outperformed its peers (funds ranked under the corporate bond funds category in CMFR in September 2021) over the past 6 months, 1-, 2-, 3-, 5-, 7-, and 10-year trailing periods. 

A sum of Rs 10,000 invested in the fund on April 05, 2011 (inception of the fund) would have grown to Rs 23,467 (8.25 per cent CAGR) on January 6, 2022, compared with Rs 23,050 (8.07 per cent CAGR) for the peer group during the same period.

Duration management

Over the past 3 years, the fund has maintained modified duration in the range of 1.25 years to 2.94 years averaging 2.09 years in comparison with 2.37 years for the peers. After declining across 2019 and 2020, yields of government securities have seen a rising trend since December 2020 and the fund has maintained duration below 3 years to reduce interest rate risk.

Portfolio analysis

During the past three years, the fund has predominantly invested in non-convertible debentures (NCDs) and sovereign securities. The allocation to NCDs averaged 72.81 per cent, while exposure to sovereign securities averaged 19.72 per cent in the same period.

The fund has maintained a conservative credit profile in the past three years by predominantly investing in the highest rated debt securities. Allocation to AA+ and above rated securities averaged 75.09 per cent in the past three years. The average exposure to highest rated debt securities (including AA+ and above and sovereign) was 94.82 per cent for the fund as compared with 89.38 per cent for the category peers. The fund did not take exposure to securities rated below AA+ during the period of analysis, while the category exposure to below AA+ rated securities averaged 3.31 per cent.