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Conservative Competence

ICICI Pru Dynamic is a fund for the downturn

Initially, this fund did not meet with much success. But over the past three years, the fund has managed to beat the category average in every downturn. But its strategy could prove to be a hindrance when the market is on a roll. And that's exactly what happened in 2007 and recently in 2009 when markets soared.

In the recent bull run (March 9 to June 30, 2009) the fund lagged behind an average equity diversified fund by a margin of 14.13 per cent as it delivered 56.93 per cent returns. The fund had an average exposure of 83.92 per cent in equities in March to June, rest being allocated in cash and equity derivatives. Also, while the allocation to defensive sectors (FMCG and healthcare) helped the fund contain its downside in 2008, they lowered the gains in this market rally.

In 2007, its allocation to cash and debt averaged at around 14 per cent, touching a high of 22 per cent at one time. But the portfolio structure too was to blame. A large-cap orientation ensured that the fund missed out on the mid-cap rally. Another reason for the poor performance was the high exposure to technology stocks and the meagre allocation to the basic-engineering sector. During this period, BSE IT was down by 14 per cent as the sector was reeling under the appreciating rupee while the BSE CG delivered 117.33 per cent.

The fund manager does not shirk away from aggressive bets. He maintains a growth portfolio and in some holdings increases the stake and exits after booking profits.

Over the long-term, the fund has displayed a decent performance with its excellent defending capabilities during the market downturns. A safe bet for conservative investors.