ICICI Prudential Dynamic Growth
- Category: Flexi Cap
- Fund Manager: Sankaren Naren
- Fund Analyst: Nehal Meshram
- Analyst Rating: Gold
- Star Rating: 3 stars
- Date of Analysis: November 2017
- Portfolio: Stock selection and cash allocation have been the primary contributors to performance.
- Process: The ability to think differently is critical in this strategy. The fund manager made his mark leveraging contrarian bets.
- Performance: The fund tends to generate higher returns when markets fall and lag when they rally.
ICICI Prudential Dynamic Growth remains a credible investment option with Sankaren Naren's distinct skill of uncovering value opportunities with a judiciously applied investment process, making a strong case for an upgrade of its Morningstar Analyst Rating to Gold from Silver.
Over time, Naren has proved himself as an astute portfolio manager with his ability to think differently and pick stocks that have the potential to generate higher returns. Naren is backed by comanager Ihab Dalwai and a highly cohesive investment team, contributing unique investment ideas that are debated rigorously. Manish Gunwani's departure and other portfolio manager reshuffles have somewhat hampered continuity, but ICICI's focus on internal talent development and incentives promotes longevity and advance succession planning.
The fund's long-standing process is research based with a mix of top-down and bottom-up styles. The fund follows a multi-cap approach across segments, with a tilt towards value stocks that have long-term growth potential. When markets run up and valuations seem stretched, reducing net equity exposure in the portfolio is critical in this strategy. Naren deploys a rules-based approach using the historical price/book value of the market to determine fair value and in turn tweak cash allocations. He backs his conviction, even if it means underperforming over shorter time frames. He takes sector bets and aggressively trades his large-cap picks, but such tactics are not without risk. In a sustained bull run, the price/book model will point towards a higher allocation to cash, which may lead the fund to underperform its peers.
The value tilt requires significant patience, as value stocks can underperform growth stocks for lengthy periods. Nevertheless, the fund has a sound record of delivering decent long-term returns. There are inevitable periods of underperformance when the value style is out of favour, but the fund's dynamic allocation managed to provide cushion to the portfolio during the downturn. Its low expense ratio also helps. The fund remains a solid choice for investors seeking contrarian instincts and who are comfortable with the related volatility.
ICICI Prudential Top 100
- Category: Large Cap
- Fund Manager: Sankaren Naren
- Fund Analyst: Nehal Meshram
- Analyst Rating: Gold
- Star Rating: 4 stars
- Date of Analysis: November 2017
- Portfolio: A concentrated portfolio with a large-cap bias.
- Process: A disciplined investment process that follows a top-down approach to evaluate stocks.
- Performance: An excellent track record across risk/return parameters.
ICICI Prudential Top 100 Growth has been upgraded to our highest Morningstar Analyst Rating of Gold from Silver. The fund's highly competent and experienced team, robust investment process, and well-structured portfolio methodology strengthen our conviction.
We regard portfolio manager Sankaran Naren as one of the highest calibre investment professionals in the industry. Naren has proven himself as an astute portfolio manager with his ability to think differently and pick stocks that have the potential to generate higher returns. We like his distinctive long-term investment style, which has delivered top-quartile performance with a high level of consistency through the cycle.
The investment team is remarkably large and collaborative, comprising seven portfolio managers and 16 research analysts. The fund is comanaged by Prakash Goel, who joined the fund house from ICICI Securities in October 2017. Manish Gunwani's departure and other portfolio manager reshuffles have somewhat hampered the continuity, but ICICI's focus on internal talent development and incentives promotes longevity and advance succession planning.
The fund follows a large-cap approach, with a tilt toward value stocks. The portfolio strategy is driven by the manager's ability to construct a differentiated portfolio comprising stocks that become long-term winners. The strategy is centred on a top-down approach, however, fundamental bottom-up analysis of stocks is also critical element, and the team excels in this area of the investment process. Naren also makes contrarian calls in this fund even if it means bearing short-term pain.
The fund's low turnover ratio demonstrates the team's patience and conviction in the outcomes of the investment process. This has delivered risk-adjusted returns well ahead of competitors over the long term. The fund has also weathered the market downturn better than category peers and has provided protection from downside risk. There may be difficult quarters because of its value bent, but under Naren's stewardship, the fund should pay off handsomely in the long run.
