ICICI Prudential Business Cycle Fund (NFO)

A detailed article on the NFO of ICICI Prudential Business Cycle Fund:

I have tried to summarize the details put forth by various communications received from AMC with respect to this scheme and have added my take on this NFO.

ICICI Prudential Business Cycle Fund is an Open-ended equity-oriented scheme that will invest predominantly in equity related instruments, here is the allocation pattern of the scheme as shown in SID:

Scheme Category: Equity - Thematic

Objective: To generate long term capital appreciation by taking advantage of business cycles in the economy. Thus it can be seen that the scheme will invest in cyclical companies that may benefit from the current economic scenario.

The scheme will follow a Top-Down approach where the macros of the economy are given preference over the micro factors. Macro factors could be: Interest rate scenario, Inflation, Fiscal stimulus, etc.

Example: The scheme will be investing in the infrastructure and banking sector during the current scenario due to lower interest rates and ample availability of liquidity.

Whereas if the situation were to reverse and we were to go into a recession period then it would shift the exposure to defensives like Pharma and FMCG sector.

The scheme will be investing across market caps and is not limited to a particular theme like Pharma or IT etc. It will reshuffle the portfolio depending upon the macro factors in the economy.

A snap of business cycles that various sectors go through:

Here is an illustration of the identification of the business cycle:

Parameters set by the scheme for its stock selection process:

From an overall perspective, Fund house wants to convey that cyclicals will outperform in high growth and low-interest-rate phase (current scenario) & defensives will do good in recession & scheme has the flexibility to move its allocation to any sector depending upon the cycle.

Details of investment mandate:

-Scheme can invest in overseas equities.

-Scheme has covered call strategy enabled.

-Scheme can take exposure to REIT & INVITs

-Derivatives exposure to index and stocks is allowed within certain limits.

Benchmark: NIFTY 500 TRI

Fund Managers: Mr. Ashish Tawakley (also manages ICICI Bluechip Fund), Mr. Ihab Dalwai (also manages ICICI BAF), Mr. Manish Bhantia (co fund manager) & Ms. Priyanka Khandelwal (overseas exposure)

Comparable scheme and performance: L&T Business Cycle fund is the comparable scheme for this NFO and here is the performance snapshot of the scheme.

The scheme was launched in mid-2014 and it has not been able to beat its benchmark since its inception to date.

NFO Dates: 29 December 2020 - 12 January 2021

Minimum amount:

- Rs. 5000 (Lumpsum)

- Rs. 100 (SIP)

My take on NFO:

ICICI AMC as a whole along with their schemes have been following a value investing approach. This particular fund may also have similar companies that have been value bets for quite some time however they have not appreciated well in price.

It is tough to gauge & shift sectors at the right time & which is very important for this scheme as it will have to continuously ensure that the current theme followed by the scheme is valid. The comparable fund mentioned above has followed a similar strategy & hasn't done well.

However, ICICI has been on the better side of calling out the macro factors right, and hence it might surprise us.

An investor who has a longer-term horizon (at least 7 years) to stay invested to sail through various cycles may take a look at this scheme,

Disclaimer - The views expressed here in this article are for general information and reading purpose only and do not constitute any guidelines and recommendations on any course of action to be followed by the reader. I'm not guaranteeing / offering / communicating any indicative yield on investments made in the scheme(s). The views are not meant to serve as a professional guide / investment advice / intended to be an offer or solicitation for the purchase or sale of any financial product or instrument or mutual fund units for the reader. The article has been prepared on the basis of publicly available information and other sources believed to be reliable. Whilst no action has been solicited based upon the information provided herein, due care has been taken to ensure that the facts are accurate and views given are fair and reasonable as on date. Readers of the article should rely on information / data arising out of their own investigations and advised to seek independent professional advice and arrive at an informed decision before making any investments. I shall not be liable for any direct, indirect, special, incidental, consequential, punitive or exemplary losses or damages including lost profits arising in any way on account of any action taken basis the data / information / views provided in the article.