ICICI Prudential Long Term Equity Fund has seemingly flown under the radar, even though it is managed by one of the largest fund houses in India and has been around since 1999. But the fact that this tax saver fund features a relatively small AUM compared to peers in itself presents an opportunity for investors especially when one considers the high returns that this scheme has provided in the long term.
Key Statistics about ICICI Prudential Long Term Equity Fund*
|Fund Performance||1 Year||3 Year||5 Year|
*Data Source – Pulse Labs. All data as of October 2018
Key Details of ICICI Prudential Long Term Equity Fund
The following are some of the key details about the ICICI Pru AMC scheme as of October 2018:
- Inception – August, 1999
- AUM – Rs. 5386.01 crore
- Fund Managers – Sankaran Naren and Harish Bihani
- Benchmark – Nifty 500 Index
- Expense Ratio – 1.18 (Direct Plan)
- Minimum Investment Requirement – Rs. 500
ICICI Prudential Long Term Equity Fund Performance vs. Benchmark
ICICI Pru Long Term Equity Fund has generates returns of 1.57%, 8.82% and 16.43% for the 1 year, 3 year and 5 year periods respectively. For the same periods, its benchmark (Nifty 500 Index) has generated returns of -3.17%, 10.39% and 14.04% as of October 2018. This shows that even though the scheme has underperformed in the medium term as compared to its benchmark, it has outperformed its benchmark convincingly in the short as well as the long term. The short term outperformance shows the unique capability of this ICICI ELSS fund to contain losses during recent market corrections, something that few of its peers have managed to achieve during the same period.
Asset allocation of ICICI Prudential Long Term Equity Fund
The ICICI Prudential ELSS Fund features a multicap mandate with a large cap bias with these equities accounting for around 67% of its assets. This allocation is only marginally higher than the category average of 62% large cap allocation recorded in October 2018. The high large cap allocation provides this scheme with low volatility investments during market corrections. The scheme also has around a quarter of its total assets invested in mid and small cap companies that accounted for 21% and 4% of the portfolio respectively (as of October 2018). These investments though potentially more volatile than the large cap investments of the scheme are expected to help the scheme deliver significant outperformance during market bull runs. The remainder of scheme assets (around 8% of total) are invested in highly liquid instruments such as units of short term debt schemes, cash and other cash equivalent instruments as of October 2018.This allocation is higher than that of its category peers (around 5% of assets) and can potentially help the scheme pick up additional high quality investments at cheap valuations during a market correction.
ICICI Pru ELSS Fund Asset Class-wise Investments Breakdown as of October 2018:
|Asset Class||Portfolio Allocation (% of total assets)|
|Large Cap Equities||67|
|Mid Cap Equities||21|
|Small Cap Equities||4|
|Cash/Cash Equivalent Instruments/Short Term Debt||8|
The following is a list of the top sectors that ICICI Pru ELSS fund is invested in as of October 2018:
|Investment Sector||% of Assets Allocated|
|Banks and Financial||23|
The scheme is heavily invested in consumption driven sectors such as financials, automotive and consumer non-durables. These sectors are expected to grow significantly in the coming years as the domestic economy grows and consumption picks up in India. Additionally, the scheme is also hedging its consumption bets by maintaining substantial investments in traditionally defensive sectors such as pharmaceuticals and power. Overall, the scheme features a balanced portfolio that stands to benefit from further growth of the domestic economy while potentially containing losses in case of a correction.
Individual Holdings of ICICI Prudential Long Term Equity Fund
The following are top 10 individual equity investments of the ICICI Prudential tax saver fund*:
|Investment Name||Weight on Portfolio (%)|
|State Bank of India||4|
*Data as of October 2018.
Tax Benefits of Investments in ICICI Prudential Long Term Equity Fund (ELSS)
Being a tax saver investment included in section 80C, those investing in the ICICI Pru Long Term Equity Fund can receive tax deduction benefits (up to a maximum of Rs. 1.5 lakhs) under the Income Tax Act, 1961. The scheme does come with a lock-in period of 3 years which is the shortest among all schemes covered under Section 80C. During the lock-in period, switch out or redemption of units is not allowed as per existing rules. Gains of up to Rs. 1 lakh derived from redemption of ICICI Prudential Long Term Equity Fund units during a financial year are tax free and only 10% long term capital gains tax is chargeable on the excess capital gains obtained. Read more about taxation of mutual funds
Investment Facts about ICICI Prudential Long Term Equity Fund
The following are some of the key facts that you need to keep in mind in case you are planning to invest in the ICICI Prudential Tax Saver Fund:
- The scheme features a conservative approach to sector specific investments
- The fund has significant investments in consumption oriented sectors such as financials
- The consumption focus of the scheme is balanced by hedge investments such as pharmaceuticals
- The scheme has higher quantity of liquid assets as compared to most of its category peers.
In view of the above, this scheme may be considered suitable for investors with moderately high to high risk appetite who are seeking high returns from a long term equity investment that also offers tax saving benefits.
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