Fund Call. ICICI Prudential Focused Bluechip Equity: A prudent choice for the risk-averse

With the market close to all-time highs, investors seeking to play it relatively safe at this juncture can bet on large-cap funds that are less volatile.

ICICI Prudential Focused Bluechip Equity is a good choice in this category. The fund has a pure large-cap focus unlike many peers that also dabble in smaller stocks.

While this may prevent the fund from being a chartbuster in raging bull markets, it still sports a solid long-term track record since inception in 2008.

With annualised return of close to 18 per cent over a five-year period, ICICI Prudential Focused Bluechip has been a top quartile performer in the large-cap category over long periods though it slips a notch in shorter periods.

The fund also beats its benchmark convincingly, with out-performance of about 5 percentage points across periods. Its winning consistency is remarkable — on a daily one-year rolling return basis, the fund has outperformed the benchmark more than 95 per cent of the time over the past five years and all the time in shorter periods.

Not only has the fund beaten than the benchmark in market rallies such as the current one but it has also contained losses better during downsides such as in 2011, 2013 and 2015 — this has translated into robust returns over market cycles.

ICICI Prudential Focused Bluechip invests 90-95 per cent of its corpus in large-cap stocks, with the rest mostly in cash equivalent instruments. It also takes exposure to derivatives of a few stocks; this is purely for dealing convenience and not for hedging or trading, says fund manager Manish Gunwani. With a large portfolio of about 50 stocks, the risk is widely spread though there are a few concentrated bets with stock holdings exceed 4-5 per cent of the corpus. The top 30 stocks constitute 80-85 per cent of the portfolio.

A growth-investing approach means that some stock picks could be pricey, but this risk is mitigated by a high-quality large-cap focus. Low portfolio churn thanks to a buy-and-hold strategy and a large corpus (about ₹13,500 crore) helps keep expense ratio (a tad above 2 per cent) below the category average and aids returns.

Astute stock picks and sector rotation have also helped. For instance, stocks such as Motherson Sumi and Bajaj Finserv have been multi-baggers over the past few years. Only three of the 52 stocks in the fund’s portfolio have lost value in the past five years.

The fund also sometimes participates in promising initial public offers such as the recent one of Avenue Supermarts. While the fund is sector agnostic, it has reduced exposure over the past year to software and pharma stocks.

Meanwhile, it has upped stake in PSU Banks and auto companies; these stocks could benefit from the efforts at bad loans resolution and improvement in economic conditions. While exposure to private banks has come down over the past year, they still account for the largest allocation in the portfolio.

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