NFO review: ICICI P.H.D. Fund opens for subscription todayBroad healthcare sector as a theme is catching up with mutual funds. After Mirae Asset, now ICICI Mutual Fund is launching a new fund offer (NFO) focused on healthcare, pharma and diagnostics. Named ICICI Prudential Pharma, Healthcare & Diagnostics (P.H.D.) Fund, the NFO opens for subscription today and will close on 9th July. It is an open-ended fund and will, therefore, re-open for the subscription after the NFO period.

Why Pharma?

AMCs are increasingly viewing pharma as a contrarian bet whose time has come. However, they are hedging those bets by giving their funds a broader remit – with healthcare and allied stocks also within the ambit. Mirae AMC’s new healthcare fund, which has a similar strategy, is closing its NFO today (we wrote about it here.) 

The pharma sector has been buffeted by US FDA inspections and other operational issues over the past three years. The three-year returns on pharma funds are -1.19% and the one year return is just 2.9%. This stands in stark contrast to an average of 11.56% and 9.03% on broader multi-cap funds or 9.82% and 10.78% on large-cap funds. The Nifty itself has delivered 9.54% and 12.30% respectively over the past three years and one year. This has made valuations cheaper, though not rock-bottom cheap.

ICICI Prudential also points to India’s low healthcare spending as a percentage of GDP. According to the product presentation, this stands at 4.8% compared to 17.2% in the USA, 10.6% in Canada and 9.7% in the UK. The fund house also points to India’s demographic profile – currently young but likely to contain increasing numbers of senior citizens going forward. Senior citizens spend a higher proportion of their income on healthcare. India’s highly competitive costs for medical tourism also find mention, as a rationale for the fund.

About the fund

ICICI P.H.D. Fund will invest 80-100% of its assets in the stocks of pharma, healthcare, diagnostics, wellness and other allied companies. It will invest 0-20% of its assets in other types of companies or in debt/money market instruments.

Ihab Dalwai who also manages other ICICI Prudential funds such as ICICI Prudential Multi-asset fund and ICICI Prudential Infrastructure Fund will manage this fund. Priyanka Khandelwal who manages ICICI Prudential Global Stable Equity Fund and ICICI Prudential US Bluechip Equity Fund will be the co-fund manager.

Key Details

NFO Period: 25th June to 9th July

Minimum Application Amount: Rs 5000

Benchmark: S&P BSE Healthcare Index

Options: Growth, Dividend Payout, Dividend Reinvestment

Fund Managers: Ihab Dalwai and Priyanka Khandelwal

Author
Neil Borate

Neil Borate is Deputy Editor, RupeeIQ. He can be contacted at neil@rupeeiq.com.