While conventional wisdom tells us that a concentrated portfolio strategy exposes the investor to incremental risks, to the credit of its fund managers, ICICI Prudential Focused Bluechip Equity Fund has delivered strong risk adjusted returns relative to its peer set since its inception. That is why, over the last several years this fund has been very popular with investors and it continues to be. Since its launch in 2008, the fund delivered outstanding performance leading to a rapid growth in the assets under management, which currently stands at over
र 9,270 crores. The surge in AUM has led the fund managers to expand its initial portfolio of around 20 high conviction stocks. The current portfolio of the fund has around 50 stocks with a pronounced bias towards banking and financial services. In fact the weight of the fund’s top 3 bank holdings, namely HDFC Bank, ICICI Bank and Axis Bank exceed 20% of the overall portfolio (as of August, 2015). Banking and financial services as a sector comprises nearly 34% of the portfolio value, which is around the same weight, the sector has in the benchmark index CNX Nifty. IT, Pharmaceuticals and FMCG comprise over 30% of the portfolio value. The fund has a higher allocation to Automobiles compared to Oil & Gas, in contrast to the relative weights of these two sectors in the Nifty. The relative outperformance of the Automobiles sector, has contributed to the ICICI Prudential Focused Bluechip Equity Fund beating the Nifty by a significant margin.
Historical Performance of ICICI Focused Bluechip Equity Fund since inception
The chart below shows the 3 year rolling returns of ICICI Prudential Focused Bluechip Equity Fund since its inception. Rolling returns are the absolute returns of the scheme taken for a specified period on every day/week/month and taken till the last day of the duration. We have chosen 3 years as the rolling returns time period because it is always recommended that long term investors should hold equity funds for at least 3 years. Rolling return is one the best measures of performance consistency. The orange line shows the 3 year rolling returns of fund since inception while the black line shows the 3 year rolling returns of the benchmark index, CNX Nifty. If we compare the 3 year rolling returns of ICICI Prudential Focused Bluechip Equity Fund with Nifty since the inception of the fund, we can see that fund has beaten the Nifty on a consistent basis nearly 100% of the times.
The chart below shows the annual returns of the ICICI Prudential Focused Bluechip Equity Funds from 2009 to 2014. We can see that the fund outperformed the market across different market conditions.
Comparison versus peer set
While the fund has been lagging some of its peers in terms of 1 year trailing returns, the long term performance of the ICICI Prudential Focused Bluechip Equity Fund relative to its peers has also been exceptionally strong. The chart below shows the 1 year, 3 year and 5 year trailing returns of ICICI Prudential Focused Bluechip versus come of its peers (NAVs as on September 28 2015).
The table below details the performance the ICICI Prudential Focused Bluechip Equity Fund versus its peers on several other important performance parameters, like Volatility, Sharpe Ratio and Alpha. While Sharpe Ratio measures the performance of a fund relative to the risk taken by it, Alpha is the excess returns over the benchmark on a risk adjusted basis. We have explained the concepts of Volatility, Sharpe Ratio and Alpha in our article, This Mutual Fund or That Mutual Fund: An Investors Fix
We can see from the table above that the risk adjusted performance of ICICI Prudential Focused Bluechip Equity Fund is quite outstanding.
The chart below shows returns of
र 3,000 monthly SIP started in ICICI Prudential Focused Bluechip Equity Fund, Growth Option, since inception. The SIP date has been assumed to be the first working day of the month. By investing र 3,000 monthly, the investor would have accumulated nearly र 487,000 with a cumulative investment of र 265,000 only.
This has been one of the most popular funds with investors over the years. The fund has continued its strong performance in terms of trailing twelve months returns. The equity market in India has been consolidating over the past three months because the valuations of companies had run up significantly, while earnings are yet to catch up. The valuation gap between large cap and midcap companies is now at its lowest in the last 5 years. As such, many investment experts believe that large cap stocks will outperform midcap stocks, at least in the initial period of the capex revival in the economy. In such a scenario, ICICI Prudential Focused Bluechip Equity Fund is poised to deliver strong outperformance over the next few years.