ICICI Prudential Balanced Advantage Fund: A suitable fund for core portfolio..! - MYREALITY.In, Real Estate, Share Market, Mutual Fund, Insurance
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Wednesday, June 13, 2018

ICICI Prudential Balanced Advantage Fund: A suitable fund for core portfolio..!


ICICI Prudential Balanced Advantage Fund: A suitable fund for core portfolio..!

The markets off late has been very volatile due to multiple domestic and global factors. This was accompanied with sharp corrections in several pockets, a development which investors who entered the market over the last three year have not seen. Therefore, it is natural to get apprehensive about investing in such a market. But what if there is product designed to take advantage of such volatility? Because, when it comes to equity investing one can’t wish away volatile markets.

This is where ICICI Prudential Balanced Advantage Fund (BAF) comes into the picture. The fund has been a pioneer in the Balanced Advantage category of schemes and has a stellar track record. Launched in December 2006, the Fund as of April 30, 2018, has assets under management (AUM) tallied at Rs 27,123 crore, and is the largest in its category. The fund is jointly managed by SankaranNaren (lead fund manager for equity portion) and Manish Banthia (debt portion).


Over the last few years, the popularity of the fund has shot up among retail investors. This is mainly on account of the stability in the returns generated and the defensive nature of the product which make it an ideal investment choice for investors with moderate risk appetite.

What BAF stands for

The investment strategy of ICICI Prudential Balanced Advantage Fund is to invest the corpus across equity and debt asset classes, based on market valuation. This would mean that the fund manager would reduce positions in best-performing asset class, while adding in underperforming assets, thereby making the most of the market opportunities. For doing so, the Scheme uses an in-house model, based on a long-term historical mean Price to Book Value (P/BV), with a view to limit the downside risk during a falling market, while aiming to capture the upside in a rising market, which is But Low, Sell High, as can be seen in the chart below.

Source: NSE India & MFIE, As on 30th April, 2018. The in-house valuation model starts from March 2010 onwards.

The portfolio currently is a blend of large and mid-cap stocks. While the large cap stocks represent established enterprises selected from the Top 100 stocks by market capitalization, the mid- and small-caps represent business entities with long-term growth potential. The allocation is decided on a tactical basis rather than any predefined ratio. Also, derivative instruments for the purpose of hedging or portfolio rebalancing for any other stock and/or index strategies is used. Thus far, the Fund has managed to execute this mandate expertly, as can be seen from the table below.

Particulars
1-year Return CAGR %
3-year Return CAGR %
5-year Return CAGR %
Since Inception CAGR %
ICICI Prudential Balanced Advantage Fund
9.57
9.31
14.78
11.23
Benchmark: CRISIL Hybrid 35+65 – Aggressive Index
10.05
9.12
13.46
10.18

The Fund has thus far managed to blunt the extremes of the market thereby generating returns in an upward trending market while protecting the downside in a downward trending market. Given the fund's extensive track record, it has experienced various market phases, and has outperformed the benchmark across all market phases.


Benefits of investing in BAF

1.  Offer diversification across equity and fixed income, which reduces risk
2.  Offer better risk adjusted returns

3.  Offer automatic rebalancing of the asset allocation within a portfolio based on market dynamics

4.  Offer a less volatile investment option

Given the nature of the product, it is designed to be a go-to fund across all phases of the market, thanks to dynamic asset allocation. Hence such a fund should be considered as a part of one’s core portfolio. Also, for lump sum investment in the current market scenario, this is one fund which stands to gain from the volatile times. Hence, BUY rating.



ICICI Prudential Balanced Advantage Fund: A suitable fund for core portfolio..! Reviewed by S. Chitra on June 13, 2018 Rating: 5 ICICI Prudential Balanced Advantage Fund: A suitable fund for core portfolio..! The markets off late has been very volatile due to mul...

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