This monthly income plan (MIP) has consistently delivered the goods with relatively less volatility. This approach, however, has placed it among the average performers in the category. The fund's stable returns though have more than compensated for that. Moreover, under its monthly dividend option, Prudential ICICI MIP has had an unblemished record of dividend payouts since its launch in October 2000.
From the start, the fund has largely invested in high-quality corporate bonds, with a small gilt portfolio. On an average, AAA bonds account for half the portfolio. With the spread between AAA bond and gilts, and that on AAA and AA bonds getting narrower, the fund increased its exposure to lower-rated papers, from 11 per cent in April 2002 to 20 per cent today.
The fund's cautious approach is also reflected in its maturity profile, which has remained among the lowest in the category. Its average maturity has never crossed two years, except during rate cuts. Though this strategy has seen Prudential ICICI MIP lag its peers during rallies, it has also helped it hold ground during turbulent times. For instance, during the volatile May 2002, when most MIPs were in the red, it managed to remain in the black. That apart relatively high cash stakes and no gilt exposure helped the fund hold steady. Maybe this performance has attracted investors and as a result, the fund's net assets doubled in June 2002. It currently manages Rs 295 crore worth of assets as on January 31, 2003, making it the second largest MIP in the category.
On the equity side, Prudential ICICI MIP has been quite careful. For instance, till November 2001, it never invested in equities. This helped it turn in positive returns even during the volatile month of September 2001, when equities went for a toss. As markets recovered post-9/11, the fund turned to equities. An average four per cent of the portfolio was spread across large-cap growth stocks.
Overall, the fund has largely adopted a buy-and-hold strategy and has been among the least volatile in the category. The fund is suitable for low-risk investors who put consistency and stability ahead of returns. Prudential ICICI MIP should not give you sleepless nights.