109740  |  INF109K01BO8  |  5 star  |  Neutral

NAV

$ 23.61

1-Day Total Return

-0.01
%
INR | NAV as of 6/23/2017 9:30:00 AM | 1-Day Return as of 23 Jun 2017

TTM Yield

0.00%

Load

Multiple

Total Assets

42.6 bil

Expenses

0.92%

Fee Level

--

Turnover

353%

Status

Open

Min. Inv.

5,000

30-Day SEC Yield

--

Category

Intermediate Bond

Credit Quality/Interest Rate Sensitivity

High/Moderate
Author
Morningstar's Take | 11/08/2016
by Ishwar Chidambaram, CFA

This fund follows an approach that is too strait-jacketed.

While the fund had a change of personnel, with Manish Banthia taking over after Avnish Jain’s exit in September 2013, our concern stems more from the fund’s strategy, which we believe offers investors a rather limited opportunity for outperformance. The investment strategy centers on the likelihood that interest rates will fall over a three-year period, or thereabouts. In keeping with this, Banthia will maintain the portfolio’s average maturity at roughly six to seven years. With a view to keeping the portfolio liquid and to steer clear of any downside arising from a credit default, Banthia invests only in AAA-rated securities and holds them to maturity. The emphasis on safety can be gauged from the high allocation to paper from public sector undertakings.

The trouble with this approach is that it leaves the fund with a rather narrow window to deliver, that is, when interest rates are on the decline. Conversely, if the interest rate cycle doesn’t play out as expected--if interest rates rise or if they are range-bound--then the strategy could well struggle. The buy-and-hold approach means Banthia is unable to execute his active investment style. The addition of CIO-Fixed Income Rahul Goswami has strengthened the investment team’s prowess in taking duration calls. Sadly, the strategy doesn’t allow the team to play to its strength. The fund may also struggle relatively in a lower interest rate environment as peers will have the ability to position themselves on the longer end of the yield curve versus this fund.

On a positive note, the fund's lower total expense ratio enhances its appeal to some extent. However, it will take significantly more to make the fund a solid offering. Unless there is evidence to suggest that the manager can add value within the constraints of the strategy, our conviction in its prospects will remain muted.

Morningstar Analyst Rating™
Analyst Rating
Portfolio Role

Primarily invested in high-quality PSU papers with average portfolio maturity of six to seven years.

People

Manish Banthia has strong support from CIO Rahul Goswami.

Parent

ICICI Prudential AMC’s stewardship is in line with the industry norm.

Process

A buy-and-hold approach with a consistent focus on long-dated paper.

Performance

The fund has delivered an average performance over the past 10 years.

Price

The fund has a lower expense ratio compared with the peer group median.

Important Disclosures

Unless stated otherwise, this report was prepared by the person(s) noted in their capacity as Manager Research Analysts (i.e., fund analysts) employed by Morningstar, Inc., or one of its affiliates. It has not been made available to the issuer prior to publication.

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