ICICI Prudential Focused Bluechip was launched in the throes of the financial crisis of 2008. Not a great environment to launch an equity fund.
The then fund manager Prashant Kothari shouted from the rooftops on how different the fund was from current offerings in the market.
The fund would be an extremely concentrated offering with around 20 stocks from the large-cap space. A tight portfolio with low churn would be constructed from a limited universe of large-cap stocks. He would consider three dominant factors when buying a stocks: stable underlying business, low leverage, and confidence in the company’s management.
To his credit, Kothari delivered.
In the following three years (2009, 2010, 2011), the fund had an enviable track record.
Unlike other large-cap offerings, this fund does not dabble in mid and small caps, even to a tiny extent. While this makes it a pure large-cap offering, on the flip side, when smaller fare is on a roll, this fund may be unable to keep up with its peers due to avoidance of such stocks.
Neither does this fund shirk from concentrated bets. It’s current exposure of 37% to financial services is a case in point, way above the benchmark and category average exposure.
At one time, the top 10 stocks accounted for almost 60% of the portfolio. Worth noting is that as the size of his fund increased over time, the portfolio accommodated more stocks and began to support around 30-35 stocks.
This is a high conviction fund which has delivered over market cycles. In all the 7 calendar years of its existence, it underperformed the category average just once. It has managed to contain the downside and participate in the upside. According to the analysis done, over a three-year period, the fund captures almost 103% of the benchmark’s upside, slightly better than its peers. During a market downturn, the fund captures 80% of the benchmark’s downside, marginally lower as compared with its peers. It’s 5-year annualized return of 12% is ahead of the category average (9%).
So why does senior fund analyst Kavitha Krishnan give the fund a Bronze rating?
While you can read her views here, in a nutshell, she believes that the fund’s very core characteristic has undergone a change due to the ballooning asset size. While current fund manager Manish Gunwani has executed well, it is important to take note of the change in the concentration levels in the portfolio. Gunwani has had to increase the number of stocks in his portfolio, which can move anywhere from 50 to 60, with the top 10 accounting for around 44%. This is due to the fund’s size posing to be a challenge in the form of market-impact cost, the opportunity cost of having to spread out trades over longer periods, and liquidity management.
The Bronze rating indicates that the fund has notable advantages across several, but perhaps not all, of the five pillars—strengths that give the analysts a high level of conviction. The five pillars being Process / Performance / People / Parent / Price.
You can access details on the fund's portfolio and performance here.
