All of us know it is very difficult to predict the sector from where the next winners will emerge. The task becomes impossibly tougher when we need to pinpoint the stocks that would do well. In 2010, pharma sector was the best among the major sectors. In 2012, financial services came out on top. In 2015, pharma again became the best sector. In short, winners keep changing. This is where active management has a big role to play in terms of selecting the right picks.
So, having portfolios for each key sector makes the job slightly easy. But, the timing is still an issue. On the portfolio management services (PMS) side, active management of multiple portfolios can really generate great returns. While winners will keep changing, navigating market through investing in suitable schemes at the opportune time may help generate reasonable returns. This is the basic premise of ICICI Prudential PMS Multi-Manager Strategic Equity Portfolio. It aims to invest in mutual fund schemes which invest in equity and equity related instrument of a particular sector/theme. Read on.
ICICI Prudential PMS Multi-Manager Strategic Equity Portfolio invests in ICICI Prudential MF schemes. The indicative number of schemes are three to six. The minimum/maximum weight in a single scheme is 5% to 40%. The remaining corpus is invested in equal weights.
The portfolio manager may rebalance the portfolio on yearly basis, in order to make necessary changes in the portfolio. However, the portfolio manager reserves the right to rebalance the portfolio at any given point in time based on a change in market conditions.
It is suitable for investors with an investment horizon of five years & above. The strategy uses Nifty 50 as the benchmark. The minimum investment amount is Rs 25 lakh.
Typically, when conditions for domestic sectors are favourable, then infrastructure and banking tend to do well. But when things get slippery, it’s time to turn defensive. This is when consumption and export-focussed sectors do much better.
MF schemes universe
The ICICI Prudential PMS Multi-Manager Strategic Equity Portfolio invests in sector/thematic funds generally. Its sector/thematic funds universe consists of:
1. ICICI Prudential FMCG Fund
2. ICICI Prudential Infrastructure Fund
3. ICICI Prudential Banking & Financial Services Fund
4. ICICI Prudential Technology Fund
5. ICICI Prudential Exports and Services Fund
6. ICICI Prudential Pharma Healthcare and Diagnostics (P.H.D) Fund
Scheme investing in overseas securities are ICICI Prudential US Bluechip Equity Fund and ICICI Prudential Global Stable Equity Fund.
As per a presentation of the ICICI Prudential PMS Multi-Manager Strategic Equity Portfolio, the performance of the strategy can be very good. A sum of Rs 1 lakh invested eight years ago would be worth over Rs 4 lakh now because of the strategy.
In 2010, the strategy would have delivered 18.9% gain (17.1% post tax) compared to Nifty’s 17.3%. In 2011, the strategy lost 21.7% post tax compared to Nifty’s 24.9%. In 2014, the strategy delivered 51% post tax against Nifty’s 31.4%.
To look at the strategy performance calendar year wise, look at the slide below. 2018 performance is as on Oct. 31.
We also find that the 3-Year Rolling Return of the strategy would be quite good. Almost 50% of the time, the strategy was able to deliver above 20% returns. Almost 88% of the time, the strategy was able to deliver above 10% CAGR over period of 3 years.
Do note that individual returns of clients for a particular portfolio type may vary significantly from the data on performance of the portfolios as may be depicted by the portfolio manager from time to time. This is due to factors such as timing of entry and exit, timing of additional flows and redemptions, individual client mandates, specific portfolio construction characteristics or structural parameters, which may have a bearing on individual portfolio performance.
At present, ICICI Prudential PMS Multi-Manager Strategic Equity Portfolio has an allocation of 34% towards exports theme based on the backdrop of strong dollar and underperformance in some of the export-oriented sectors relative to the benchmark in the medium term.
Look at the following slide to know its market cap and sector exposure details.
RupeeIQ take – There are four advantages of ICICI Prudential PMS Multi-Manager Strategic Equity Portfolio. One, weight management of underlying scheme based on various economic parameters can generate alpha. Two, this PMS strategy is suitable for investors seeking to invest in equity markets through a portfolio of equity mutual funds. Three, the portfolio construction based on the fund manager’s view on capital markets and various sector valuations can lead to optimal positioning. Four, the strategy allows active review and periodic re-balancing, which can reduce risks and boost returns.
Disclaimer: The article is only for informational purposes. Investors are requested to consult their financial, tax and other advisors before taking any investment decision.