Aggression is a relative word with the manager of this scheme. In September this year, this fund has raised the average maturity of its portfolio to 5.5 years. What's so aggressive about that, you ask?
Simple: that's the highest this scheme has gone on the maturity scales: historically, it's stuck to much lower maturity levels. Why, even during the declining interest rate through 2001, the scheme's average maturity stayed between 3.1 and 4.3 years - while its peers were pushing five-year-maturity levels without batting an eyelid.
Indeed, it's traditionally stuck to AAA bonds and government paper, resolutely shunning high-return high-risk options like low quality bonds. Its conservative style ensured it made only small interest-rate and maturity-spectrum bets, focussing instead on quality. The outcome? In tangible terms, annual returns that place it in the top half in its category backed by lower-than-average volatility. The watchword with this scheme is quality. Examine its portfolio, and you'll never find less than 70-80 per cent of its assets invested in AAA corporate bonds and gilts. Exposure to bonds with less than AAA ratings? Capped at 15 per cent. Crucially, all holdings are diversified so that there are never too many eggs in the same basket. For instance, its current gilt holdings are spread over 13 different securities, with no more than seven per cent in any one of them.
The fund has mostly avoided active trading in securities and largely depended on buy-and-hold strategy. It has also not hesitated in deploying certain portion of its assets into cash when need demanded. For example, during the rate hike of July 2000, the fund went defensive with 18 per cent cash stake. However, the fund is now developing an appetite for longer dated papers. Average maturity has for the first time crossed the five-year mark. Government securities now account for 38 per cent of the portfolio.
Over the long haul, Prudential ICICI Income Plan's well-executed strategy has kept unit holders in good stead. The fund's high-quality portfolio has provided good return with less volatility. Investors looking for a core bond holding should do well here.
This article was originally published on December 30, 2002.
Ask Value Research 
New episodes every Friday 
New Process Alert 
Seems like you've uploaded a wrong QR code. Please upload the QR code downloaded from MF Central platform.
