ICICI Prudential Value Discovery Fund

AUM Rs 4114.4 CRORE.................................................................................... AS ON JUNE 30, 2014

NAV Rs 91.91................................................................................................... AS ON JULY 18, 2014

ICICI Prudential Value Discovery Fund is one fund which is true to its name and has indeed discovered value for its investors in the long term. We can substantiate this by the fact that the value of Rs 1,000 invested per month for the last three years (which is Rs 36,000 cumulatively) today stands at Rs 62,546. Also, if we look at the AUM of the fund, it has grown since 2009 at a CAGR of 49 per cent.

Managed by Mrinal Singh since February 2011, the AUM of the fund currently stands at Rs 4,114 crore as on June 30, 2014. The fund works with the objective of investing in a well-diversified portfolio of value stocks (those having attractive valuations in relation to earnings or book value or current and/or future dividends). The fund follows the principles of value investing to buy stocks at discount to their intrinsic value. The fund follows a rigorous process to identify fundamentally strong well-managed companies which are out of market’s favour. The fund follows a bottom-up strategy and yet it ensures diversification across sectors. The fund has shown remarkable resilience in a lean market and has handsomely leaped in a rising market.

Also, the fund has been able to outperform its benchmark as well as its category of funds in the last one year as well as in the longer term. In a period of one year, three year and five year, the fund has outperformed its category returns by 1,066 basis points, 443 basis points and 600 basis points, respectively.

What is also attractive about the fund is its diversified portfolio. Looking at the composition of its portfolio, the top five sectors constitute 63.62 per cent of its portfolio. The top five sectors are: Financial (26.14 per cent), Engineering (11.41 per cent), Construction (8.87 per cent), Services (8.75 per cent) and Energy (8.45 per cent). This sectoral asset allocation clearly exhibits that the tilt is towards cyclical sectors, which have once again come into the limelight post-elections. The top fi ve stocks that form part of its portfolio are ICICI Bank (7.92 per cent), Reliance Industries (3.87 per cent), Sadbhav Engineering (3.21 per cent), State Bank of India (2.95 per cent) and Amara Raja Batteries (2.69 per cent). Out of 61 companies that form part of its portfolio, mid-cap and small-cap companies constitute 69.87 per cent of the AUM, while the balance is held in exposure to large-cap stocks.

 The improved performance of the fund has not come at the cost of risk-taking even on a conservative note as compared to its peers. This can be substantiated by looking at the sharp ratio which stands at 0.77. The alpha of the fund stands at 11.15, which represents the excess return that the fund has generated at a given level of risk. The fund could be an ideal candidate for inclusion in the mutual fund portfolios of both risk-taking as well as risk-averse investors. However, the SIP route for investors seems to be the best way to invest in this fund scheme.

Mrinal Singh
Fund Manager, ICICI Prudential AMC