20 years of ICICI Prudential Long Term Equity Fund: Turning Rs 3 lakh into Rs 1 crore

The ELSS fund is the best performer in terms of SIP investments over 15 year and 20 year periods too

Kumar Shankar Roy Aug 26, 2019

MF returnsICICI Prudential Long Term Equity Fund (tax saving/ELSS) has completed 20 years of existence, entering an elite club of mutual fund schemes that have survived two decades of scrutiny, and created wealth for investors. A sum of Rs 3 lakh invested in this tax-saving fund 20 years ago would have become Rs 1.03 crore now, with the fund generating a CAGR since inception of 19.38% compared to 10.91% by the Sensex in the same time. This is the third best return among tax-saving funds in the period and also among the best wealth creation stories amongst over 40 equity funds existing since August 1999 when ICICI Prudential AMC unveiled the scheme. We cover this fund as part of our review of funds who have shown good performance over a long period of time.

ICICI Prudential Long Term Equity Fund

ICICI Prudential Long Term Equity Fund is a diversified equity fund that aims to generate capital appreciation by investing in equity instruments. It offers twin benefits of tax savings and wealth creation over other traditional investment instruments. The 3-year lock in period allows flexibility to select stocks with long term perspective. The scheme is noted for its value investing approach to stock selection. Over the years, this tax-saving fund has become one of the largest schemes in its category with an asset size of over Rs 6,000 crore (it is the sixth biggest ELSS).

Consistent outperformer

The fund has been doing well consistently. From the inception to 2018 calendar year-end, the fund has outperformed its benchmark (Nifty 500 TRI) in terms of five-year returns about 99% of the time since inception. This is extremely good. Importantly, during this long period, nearly 82% of the times, the fund’s five-year rolling returns were more than 12%. In comparison, Nifty 500 TRI’s five-year rolling returns were more than 12% in 64% of the times.

From a SIP perspective, the long-term performance of ICICI Prudential Long Term Equity Fund is quite good. A 15-year SIP, ended August 23, 2019, in the fund would have generated 13% CAGR, which is the highest among ELSS category and better than peers like Franklin India Taxshield Fund, Tata India Tax Savings Fund and Aditya Birla Sun Life Tax Relief 96.

Over the 20-year period too, ICICI Prudential Long Term Equity Fund is a good SIP fund with over 18.3% return (CAGR), which is the best in the category and higher than peers like HDFC Taxsaver Fund, Principal Tax Savings Fund and Taurus Tax Shield Fund apart from the above-mentioned schemes.

ICICI Prudential Long Term Equity Fund (Tax Saving)
SIP tenure Total investment (Rs 1000 per month) * Return (CAGR %) Value of investment
3-year 36000 1.25 36702
5-year 60000 4.95 68200
10-year 120000 11.29 222762
15-year 180000 13.01 556222
20-year 240000 18.31 2453717
*SIP made on the 1st of every month    Data as on Aug 23, 2019

The SIP return of the fund, however, in the 5 year and 10 year phases has room for improvement. A 5-year SIP return of less than 5% compares to over 8.6% return notched up by leader Axis Long Term Equity Fund. The gap is much narrower for a 10-year SIP, with ICICI Prudential Long Term Equity Fund generating 11.29% versus leader DSP Tax Saver Fund’s 12.85%.

The fund managers are Sankaran Naren and Harish Bihani. Both have been managing this fund from November 2018, while Naren has been managing it on and off previously.

RupeeIQ take

The ICICI Prudential Long Term Equity Fund is a scheme with pedigree. It is managed by the fund-house’s CIO Sankaran Naren, which tells you about the importance and the focus this ELSS enjoys. Over the last 20 years, the fund has passed through multiple hands. Yet, its performance speaks for itself. It is a consistent outperformer compared to the benchmark. Critics may point towards the fund’s relatively poor performance in 2017, but that was probably an accident. Over the last 10 completed years i.e. 2009 to 2018, the fund has mostly delivered the goods. In years when the market faces a downturn, ICICI Prudential Long Term Equity Fund has a credible record of containing downsides. It loses less, and wins more — which is why it deserves to be considered by investors.

Disclaimer: Views expressed here in this article are for general information and reading purpose only. They do not constitute any guidelines or recommendations on any course of action to be followed by the reader nor are they meant to serve as a professional guide/investment advice.

Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. Kumar is a financial journalist, with a functional experience of 15 years. He tracks mutual funds, insurance, pension, PMS, fixed income/debt and alternative investments markets closely. He has worked for The Times of India, The Hindu Business Line, Deccan Chronicle Group, DNA, and Value Research, among others, across different cities in India. He is deeply interested in marrying data insights with actionable opinion. He can be contacted at kumarsroy@rupeeiq.com.

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