Despite emerging the largest fund in its category, Prudential ICICI Income fund has remained committed to quality. Coupled with moderate interest risk stance the fund remains a stable performer. The scheme facilitates easy liquidity through instacheque in metros and Bangalore where the investors can get an instant cheque for redemption in excess of Rs 50,000 or balance in account, which ever is lower. The dividend payout aggregating to 28.2%.
The massive size offers stability for its is a strong guard against redemption pressure since even small cash position can take care of reasonable repurchases and the fund can be almost fully invested. PIIF has handled the growing corpus dexterously by steering clear of credit and liquidity risks. It continues to deploy a greater part of assets in triple A rated securities which have averaged around 87% of the corpus trailing 12 months. The fund however, has been caught on the wrong foot with a 5.6 % allocation to IDBI, which was recently downgraded from AAA to AA+. The fund seeks to pep up its returns with a marginal exposure to unrated and AA instruments, which has averaged at 12%.
While bond prices and interest rates move in reverse direction, a lower maturity portfolio means lesser impact of interest rate fluctuations. The fund actively realigns maturity with interest rate outlook by leveraging the gilt exposure. These instruments, besides offering high liquidity provide scope for trading profits. However, by holding an internal limit of 4 years on portfolio maturity, the fund has held the interest risk at bay. While the fund has well leveraged its asset base to earn above average returns, the lower expenses associated with a large sized fund are yet to come by.
With this conservative strategy, PIIF has emerged a moderate risk fund to offer a reasonable return of 13.19% since launch.