A competent manager and a sound investment approach are this fund’s most appealing aspects.
Mrinal Singh has proved himself in the portfolio manager role, which he assumed in Aug 2009. Singh, who started with ICICI Prudential AMC in June 2008 as an equity analyst, took over a technology sector fund in Aug 2009. In Feb 2011 when he took over this fund, it was his first stint running a diversified fund. Since then, we have had the opportunity to evaluate the fund in a downturn (2011) and upturns (2012 and 2013) marred by volatility, enabling us to build confidence in both the manager and his approach.
Singh combines absolute and relative valuation parameters to uncover stocks he believes are trading at a significant discount to their fair value. Beyond valuation, he looks for differentiating factors (technological prowess, cost advantage) that can give the company a sustainable edge over peers. Simply put, he seeks a combination of attractive valuations and robust fundamentals. During his stint as an analyst, Singh was the investment team’s small/mid-cap specialist. He plays to his strengths here, running a small/mid-cap portfolio and his willingness to be patient with smaller-cap fare gels well with the valuation-conscious approach.
That being said, the approach can hold back the fund in rising markets. For instance, when valuations are stretched, the fund may have a hard time competing. Because the strategy focuses on uncovering attractively priced stocks, being ensnared in value traps is a risk. A growing asset base can pose challenges in the form of having to spread out trades and liquidity management. It is evident that over shorter time frames investors need to be able to ride out bouts of volatility and underperformance. However, for risk-tolerant investors willing to be patient and stay invested over a market cycle, the fund can deliver pleasing results.
So far, Singh has been able to effectively execute the investment strategy. Hence, his presence at the helm aids our confidence. The fund offers enough to earn our Bronze rating.
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.
Analyst Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst Ratings are based on Manager Research Analysts’ expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ significantly from what was expected. Analyst Ratings are not guarantees nor should they be viewed as an assessment of a fund’s or the fund’s underlying securities’ creditworthiness.
No material interests are held by Morningstar or the Manager Research Analyst in the financial products that are the subject of the research reports or the product issuer. Regarding Morningstar’s conflicts of interest: 1) Manager Research Analysts’ compensation is derived from Morningstar’s overall earnings and consists of salary, bonus and in some cases restricted stock; however, Manager Research Analysts are neither allowed to participate directly or try to influence Morningstar’s investment management group’s business arrangements nor allow employees from the investment management group to participate or influence the analysis or opinion prepared by them. Further information on Morningstar’s Code of Ethics policies is available from http://corporate.morningstar.com/us/asp/subject.aspx?xmlfile=540.xml
Unless otherwise provided in a separate agreement, you may use this report only in the country in which its original distributor is based. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. This report is for information purposes only, and should not be considered a solicitation to buy or sell any security. Redistribution is prohibited without written permission.
For Recipients in India: Research on securities as defined in clause (h) of section 2 of the Securities Contracts (Regulation) Act, 1956 (“Investment Research”) is prepared by Morningstar Investment Adviser India Private Limited, which is registered with the Securities and Exchange Board of India. Your access to the Investment Research does not establish an advisory relationship with Morningstar Investment Adviser India. You should seek the advice of a financial professional before making an investment decision to ensure, among other things, that the security is suitable based on your particular needs and circumstances.