A rose by any other name….
ED & CIO
ICICI Prudential AMC
ICICI Prudential’s Dynamic Plan – a fund that has attracted a loyal set of distributors and investors – dons a new avatar of a Multi Asset Fund consequent to implementation of SEBI’s product categorization norms. For its followers and loyalists, the good news is that it seems to bear testimony to the old adage, “a rose by any other name is still a rose” – the broad contours of the fund strategy remain the same. For market participants, the advent of an established fund with a long track record into the nascent multi asset category could be just the shot in the arm this under-recognized category needs.
WF: In what ways will the actual asset allocation of ICICI Prudential Dynamic Plan change under its new avatar of ICICI Prudential Multi Asset Fund?
Naren: ICICI Prudential Multi Asset Fund (erstwhile ICICI Prudential Dynamic Plan) is an open ended scheme investing in Equity, Debt, Gold /Gold ETF/units of REITs & InvITs. As per the new category, the scheme has to invest atleast 10% across three asset classes - equity, debt and others assets (including REITs, InvITs, gold and commodity as permitted by SEBI).
Just like before, the equity and debt portion will be dynamically managed based on market valuations, allowing the Scheme to manage net equity in the range of 10-80%. However, the Scheme will maintain its equity taxation by having gross equity of 65%. The Scheme will continue to have a multi-cap approach, in terms of market capitalization, and will maintain its contrarian approach when it comes to stock/sector allocation. Earlier too, the scheme SID allowed investments in other asset classes like REITs, InvITs and foreign securities.
In effect, apart from the 10% compulsory investment into gold/ REITs/InvITs and removal of foreign securities, the constitution of the Scheme remains the same.
WF: While the scheme mandate gives very wide ranges (10% - 80%) for equity, debt and other assets, what will be the practical limitations that the fund manager would usually abide by?
Naren: Similar to the earlier strategy, equity and debt levels would be managed dynamically, based on market valuations. The Scheme will have gross equity exposure close to 65% to enjoy equity taxation, but the net equity levels, with the help of derivatives, can be lower. Since it falls under the multi-asset category, the Scheme will also have close to 10% exposure Gold/REITs/InvITs. However, tactical allocation to other assets component may increase if such assets are available at attractive valuations viz-a-viz equity/debt.
WF: How will asset allocation across different asset classes be decided? Is there an algorithm that will guide these decisions – like you have for your Balanced Advantage Fund?
Naren: Broadly, the equity and debt levels would be directionally governed by an in-house model, in conjugation with the discretion of the fund manager. In terms of other asset classes, currently REITs and InvITs market is at a very nascent stage. However, over the next two-three years, we expect this space to pick-up in terms of the number of offerings, thereby increasing the investment options.
WF: How has the benchmark changed in the new avatar?
Naren: In view of the multi-asset scheme categorization, the Scheme will now have a composite benchmark of Nifty 50 (80%), CRISIL Liquid Fund Index (10%), LBMA* AM Fixing Prices (10%).
* LBMA London Bullion Market Association & AM fixing price refers to the price of gold fixed in the morning
WF: What will be the tax implications of returns from the scheme in its new avatar?
Naren: The endeavour of the scheme would be to have 65% exposure to equity, such that on redemption, the scheme will be treated as an equity fund thereby attracting equity taxation (as per prevailing tax laws).
WF: The fund effectively moves from a much larger segment of diversified equity funds to a smaller segment of multi asset funds. Do you expect sales momentum to reduce as a consequence?
In its new avatar the Scheme offers investors a unique investment proposition. We believe this product/category can see lot of traction in the years ahead. In the interim, it is important that we raise awareness about the availability of such a product.
WF: Why in your view have multi asset funds lagged in terms of business momentum as compared with hybrids that focus only on equity and debt? What plans do you have to promote this category?
Naren: Before the formalization of the multi-asset category, the larger conversation has always been limited to debt and equity asset classes, either individually or in composite nature.
Now, that SEBI has launched this category, we believe this will attract investor interest especially from those investors who are investing for the long term, and are seeking asset allocation.
Riskometer & Disclaimer
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
The information is only for distributors and Advisors of ICICI Prudential AMC and the same should not be circulated to investors/prospective investors. All data/information used in the preparation of this communication is specific to a time and may or may not be relevant in future post issuance of this communication. ICICI Prudential Asset Management Company Limited (the AMC) takes no responsibility of updating any data/information in this communication from time to time. The AMC (including its affiliates), ICICI Prudential Mutual Fund (the Fund), ICICI Prudential Trust Limited (the Trust) and any of its officers, directors, personnel and employees, shall not liable for any loss, damage of any nature, including but not limited to direct, indirect, punitive, special, exemplary, consequential, as also any loss of profit in any way arising from the use of this communication in any manner.
Nothing contained in this communication shall be construed to be an investment advice or an assurance of the benefits of investing in the any of the Schemes of the Fund. Recipient alone shall be fully responsible for any decision taken on the basis of this document.
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