ICICI PRUDENTIAL BUSINESS CYCLE FUND NFO: Should you Invest in it?

Icici Prudential mutual funds

Table of Contents

Business cycles in an economy are typically characterized by the fluctuations in economic activity measured by real Gross Domestic Product growth and other macroeconomic variables. A business cycle is basically defined in terms of periods of expansion and contraction.

During expansions, the economy is growing in real terms (i.e. excluding inflation), as evidenced by increases in indicators like employment, industrial production, sales and personal incomes. During Contraction, the economy is contracting, as measured by decreases in the above indicators.

To materialise Business cycle movements in one’s portfolio ICICI AMC launched new NFO of ICICI Prudential Business Cycle Fund with an objective to gain from different business cycles . Lets discuss about this scheme and in the end we will give our review whether you should invest in this Scheme or Not.

When ICICI PRUDENTIAL BUSINESS CYCLE FUND NFO will open?

NFO open date: December 29, 2020

close date: January 12, 2021

Offer of Units of Rs. 10 each during the New Fund Offer period and continuous offer of Units at NAV based prices.

Face Value of units of the Scheme is Rs. 10/- per unit.

What are the Investment strategies of this scheme?

The Scheme will be a diversified equity fund which will invest predominantly in equity and equity related securities with focus on riding business cycles through dynamic allocation between various sectors and stocks at different stages of business cycles.

Under Normal circumstances asset allocation would be as follows

InstrumentsIndicative allocations
(% of total assets)
Risk Profile
MaximumMinimum
Equity and equity related instruments selected on the basis of business cycle10080High
Other equity and equity related instruments200Medium to High
Debt and Money market instruments, including Units of Debt oriented mutual fund schemes200Low to Medium
Preference shares or any other asset as may be permitted by SEBI from time to time200Medium to High
Units issued by REITs and InvITs100Medium to High
source:offer document

The Scheme may also take exposure to:

  •  Derivative instruments to the extent of 50% of net assets.
  • Securitised debt up to 50% of debt portfolio.
  • Structured obligations up to 50% of the debt portfolio
  • Stock lending up to 20% of net assets.

Some of the explanatory illustration explained by the fund documents are below

Source: Marking material provided by AMC

Who will manage the Scheme?

Mr. Anish Tawakley (PGDM (MBA) from IIM Bangalore and B. Tech (Mechanical Engineering) from IIT Delhi. having 24 years of experience in Equity research

AND

and Mr. Ihab Dalwai(Chartered Financial Analyst, CA and B. Com) having 9 years of experience in equity research

are the fund managers of the Scheme.

Mr. Manish Banthia will be the co-fund manager involved in identifying business cycles. Ms. Priyanka Khandelwal is the dedicated fund manager for overseas investments

What is the Benchmark Index for this scheme?

Nifty 500 TRI would be the Benchmark index for this scheme and

10 years performance of Nifty 500 TRI is as follows

Where this ICICI Prudential Business Funds stands on Riskometer?

source: Scheme document

As we already know that this scheme invest in 80% to 100% in equity related instruments ,there for riskometer shows High risk in this fund, So those Investor who has High risk capacity can look into in.

What is the expense ratio of this scheme?

source: offer document

However As per the Regulations, the maximum recurring expenses that can be charged to the Scheme shall be subject to a percentage limit of daily net assets as in the table below

First Rs. 500 croreNext Rs. 250 croreNext Rs. 1,250 croreNext Rs. 3,000 croreNext Rs. 5,000 croreNext Rs.40,000 croresBalance
2.25%2.00%1.75%1.60%1.50%TER reduction of 0.05% for every increase of Rs. 5,000 crore of daily net assets or part thereof1.05%
source :disclosures

Our view on Icici Prudential Business Cycle Fund

Since this Fund is focused on Business cycle which is some kind of new strategy . It look good in the theoretical explanation but practical outcome may significant different . Since Nifty and Sensex are around all time high there is no incentive to Invest in this Fund. So we advise to “Avoid” this fund. There are plenty mutual funds which proved by their performance over period of time . Investor should consider those funds