From being a lousy performer in 2004, ICICI Prudential Dynamic worked its way up in the next two years only to tumble down in 2007.
A look at the portfolio over the past year (November 2006-November 2007) showed a wrong call on the tactical rebalancing front. This fund has the flexibility to shift wholly into debt or equity according to the fund manager's discretion. In March and April 2007, the fund manager began increasing the debt component in probable anticipation of a downside. This move backfired as the market began an upward climb since then and has not looked back. In isolation, this does not worry. But when coupled with other factors, it throws up a disturbing picture.
Sankeren Naren took over in September 2006 and adopted a more defensive strategy which resulted in an average exposure of 60 per cent to large caps. Since he took over (right till December 30, 2007), the BSE Mid Cap (65 per cent) and the BSE Small Cap indices (81 per cent) gained much more than the Sensex (54 per cent). His sector allocations too did not bear fruit. He ignored the growth sectors of 2007 with low exposure to construction (0.84 per cent), engineering (1.06 per cent) and financial services (8.84 per cent). In fact, he went the contrarian way with an average exposure of 18.5 per cent to technology. In November 2007, the fund trebled its holdings of Infosys Technologies.
Though the fund has the leeway to minimize the downside risk in a falling market, it has failed to make smart moves in a rising one. If invested in this fund, keep a close watch on your investment.
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