Over last one-year, the fund has delivered 40% as compared to 34% by its benchmark
According to Anish Tawakley, Deputy CIO – Equity and the fund manager of the Scheme, “Sector returns generally are affected by various business cycle phases. While each phase is different, an investment approach which identifies and analyses key phases in the economy could help generate a positive investment experience. ICICI Prudential Business Cycle Fund offers a distict style by focusing on the macros. By investing, investors can gain access to appealing sectors at any particular point in time. It will further aim to achieve diversification within those sectors.”
ICICI Prudential Business Cycle Fund is an equity oriented offering wherein the fund invests into companies based on different stages of an economic cycle. This concept is known as business cycle based investing. In such a fund, the fund manager decides on the allocation to various sectors and stocks to make the most out of the opportunities arising out of that particular phase of the economic cycle.
The Fund
ICICI Prudential Business Cycle Fund was among the earliest offering based on this theme. In its three-year track record, its fund manager, Anish Tawakley, Lalit Kumar & Manish Banthia has time and again taken several sectoral calls which has worked very well for the fund. The fund also has the flexibility to take exposure to foreign securities.
If an investor had invested Rs. 1 lakh at the time of inception (18-Jan-2021), that investment as of January 31, 2024, would be worth to Rs 1.93 lakh, i.e. a CAGR of 24.31%. A similar investment in the Scheme’s benchmark would have yielded Rs 1.73 lakh, i.e. a CAGR of 20%.
In terms of SIP, a monthly investment of Rs 10,000 since inception would amount to a total investment of Rs 3.7 lakh. As of January 31, 2024, the value of that investment would have grown to Rs 5.48, i.e. a CAGR of 26.5%. A similar investment in the benchmark would have yielded a CAGR of 20.8% for the same period.
In terms of the last one-year, the fund has delivered returns to the tune of 40% as compared to its benchmark, which delivered 34%.
Fund Portfolio
The Fund has an AUM of Rs 7,951.48 crs. Nearly 51% of the portfolio comprises of domestic-facing sectors, as the fund looks to tap into the robust economic activity underway. Keeping with this theme, banks, autos, construction and telecom form a significant portion of the portfolio. The portfolio also has exposure to defensive sectors like Pharma & IT due to better valuations and for defensive consideration to mitigate any probable impact due to geo-political tensions, global growth slowdown, etc. The fund has a 8% cash and a near 4% allocation to foreign securities. (Data as on January 31, 2023).
Understanding Business Cycle
Typically, a business cycle, comprises of Growth, Recession, Slump, and Recovery phases.
Each phase influences certain set of sectors uniquely. In the growth phase, companies chalk out expansion plans, job opportunities are plenty and consumers splurge on discretionary items. Conversely, in the slump phase, both consumers and businesses are ervous, leading to delayed spending, idle factories, cost-cutting, and layoffs.