#fundreview

Is it Time to Exit Icici Prudential Value Discovery Fund?

Icici Pru Value Discovery Fund has not outperformed its benchmark BSE 500 over last 5 years.

Is it time to exit the fund? Answer could be “YES / No” or “With some considerations”, Let’s find out which can be the option.

For any Mutual Fund Strategy, Investment Mandate is of critical importance. Hence, the fund manager of the scheme cannot go against the mandate to improve the performance.

Value Discovery Fund strictly belongs to Value Category with Blend Portfolio. Value is used to diversify the portfolio. Make sure you understand truly the meaning of Diversification.

All funds in your portfolio will never generate returns at most times. While some funds will have upside & some at lower. Value Funds will help you regain your losses over longer period.

Investment Objective of this scheme says: To generate returns through dividend income & capital appreciation by investing primarily in a well-diversified portfolio of value stocks.

It also says, “However, there is no assurance or guarantee that the investment objective of the Scheme would be achieved.”

This might be a warning bell according to me.

In this fund’s case, inflow has stopped & redemptions has increased. In Sept 2018, AUM of this scheme was 16477.28 Crores, whereas, in Sept 2019 it was 15095.61 Crores. Can you think what would be the reason for this?

Through above image, you can understand the fund has underperformed its benchmark & category for 1 yr, 3 yrs & 5 yrs duration.

Rolling Returns of the fund V/s. Benchmark

The fund has outperformed the index by only 2044 times as compared to 2113 times.

To understand it more clearly how the fund has performed vis-a-vis with other fund of same category i.e. Value Style, view the comparison.

What should you do as an Investor? Is it time to Exit?

What will be your call:- If the fund manager deviates from investment mandate to improve performance

Is the Mandate Important?

If Mandate is important, Can you Handle Value Strategy? If the answer is YES…then stay invested. If NO, then Exit.
If returns make you happy….then you are investing in wrong strategy & hope some strategy will be created in future.

Mirae Asset AMC has announced to change the current Multi Cap category to Large Cap with effect from 1st May 2019.

Today’s blog is all about performance, risk rating and takeaways for existing or new investors of this fund.

Reasons for change to Mirae Large Cap Fund

CEO Mr. Swarup Mohanty’s arguments are:

The fund was managed as Large cap for last 4 years.
The fund will hold midcaps according to SEBI rules, i.e. 15% – 18%
Growing AUM (Assets Under Management)

A Multi Cap Fund is an Open Ended Equity Scheme investing across Large Cap, Mid Cap and Small Cap stocks. Now, the CEO says from last 4 years, the fund was managed as Large cap, which also means the fund manager has not exercised his right to invest across sectors.

Does’nt sound convincing

For eg:- If I wanted to buy this fund, then i would had gone through scheme document, key information memorandum, one pagers, amc classification, rating portals etc, I would have got impression as a Multi Cap fund.

So, when i had a look at portfolio nearly 87% is in Large cap, 11.5% in Midcap and sparing allocation to small cap.

Many investors will have to re-jig their portfolios now due to change of the scheme mandate which is a frustating job.

Rolling Returns and Risk (5 years)

Rolling Returns and Risk (2 years)

Performance Dip due to major allocation to Large cap

2 and 3 years

New Investor: Should I Stop / Exit?

If you have another Large cap fund, then decide which one you want to hold. All large cap fund performance will be approx same…(just few % more or less)

Existing Investor: Should I Stop / Exit?

If you have a major allocation in this fund, kindly review the situation and act upon what suits you the best.

Evaluate your position carefully. Focus on risk management instead of aggressive returns.

Investors willing to Exit from this scheme can do it freely in April 2019. No Exit Load will be levied.

Investors who cannot evaluate their scheme’s performance based on risk analysis can reach us. We will be happy to help.

Artharthi

In pursuit of wealth

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