ICICI Prudential Dynamic Plan is a flexi-cap opportunity fund launched in November 2002. The fund has been ranked in the top 30 percentile, that is, either CRISIL Fund Rank 1 or CRISIL Fund Rank 2, of the peer group in the ‘Diversified Equity Funds’ category under CRISIL Mutual Fund Ranking methodology for 13 of the past 16 quarters. This methodology looks at a fund’s performance in the past two years.
Over a longer time frame, the fund has been ranked CRISIL Fund Rank 1 in the ‘Consistent Performers - Equity’ category for the quarter ended December 2011, wherein the fund entered this category for the first time. The ‘Consistent Performers’ category ranks those funds which have been part of the CRISIL Mutual Fund ranking for a five-year time frame. The rank is a composite of historical performance of the fund in the CRISIL Mutual Fund Ranking and risk-adjusted return of the fund over a five-year period. The fund’s average assets under management (AUM) were Rs 3,962 crore for the quarter ended December 2011.
Investment style
The fund dynamically manages its equity exposures in response to equity market valuations. It has increased the equity exposure when the markets were undervalued and decreased it when the markets were overvalued. As compared to peers, the fund has aggressively managed its equity exposure. Since inception, the fund has been able to outperform its benchmark(S&P CNX Nifty) 71 per cent of times in a downtrend (benchmark giving negative returns quarter-on-quarter) and 68 per cent of the times in an uptrend (benchmark giving positive returns quarter-on-quarter). This indicates that the fund’s strategy has helped in outperforming the benchmark on majority occasions across market phases.
Performance
The fund has outperformed both the benchmark and the category across multiple time frames, viz., one, two, three, five and seven years. For the past one year, the fund gave positive annualised return of three per cent as against two per cent by the category and negative return of one per cent by the benchmark. Over the longer time frame of seven years, the fund gave an annualised return of 21 per cent vis-à-vis 14 per cent and 16 per cent by the benchmark and category, respectively. A monthly systematic investment plan (SIP) investment of Rs 1,000 for seven years would have grown to Rs 1,42,139 as on March 14, 2012 (principal invested of Rs 84,000) resulting in annualised returns of 15 per cent. A similar investment in the benchmark would have grown to Rs 1,16,958, yielding nine per cent annualised gains.
Risk
The fund has managed to generate higher returns than the benchmark and category while maintaining low volatility over the past five years. The average monthly volatility for the fund over this period was 23 per cent vis-à-vis 27 per cent and 28 per cent for the category and benchmark, respectively. Since inception, the fund has a beta of 0.8 indicating relatively lower risk.
Portfolio analysis
The fund has a well diversified portfolio with average 59 stock holdings over the past three years. At the sector level, the fund is more concentrated than its peers. The top 5 sectors of the fund formed 63 per cent of the fund as against 56 per cent for the category over the past three years. Within equities, the fund has taken a majority exposure to large cap stocks. Over the past three years, the fund has taken an average 77 per cent of its equity exposure to CRISIL defined large cap stocks. Further, almost 52 per cent of these stocks were part of the S&P CNX Nifty.
Overweight exposures to sectors like pharmaceuticals, healthcare and telecom and underweight exposures to petroleum products, power and industrial products have helped the fund deliver alpha over the benchmark during the past three years. The fund has chosen to remain underweight on over owned sectors like banks and petroleum products as compared to the category over the past three years.
CRISIL Research
