ICICI Prudential Child Care Gift Plan: Switch:: Business Line

��

-->

Balanced funds are believed to hedge investors against equity market volatility. This is because of the stable returns they are expected to generate from their debt portfolio. But not all balanced funds have really lived up to this expectation.

ICICI Prudential Child Care Gift, with a portfolio closely resembling balanced funds, underperformed its benchmark and other funds in the category across all time periods. Investors may consider switching to HDFC Children’s Gift Investment Plan. However, do note that exiting ICICI Pru Child Care will mean an exit load of one per cent if holding period is less than three years.

ICICI Pru Child Care Gift Plan’s underperformance vis-à-vis the CRISIL Balanced Index has widened in the past year. Wrong sector and stock bets hurt performance.

The fund has not been able to contain downsides in falling markets despite flexibility to invest up to 35 per cent of its assets in debt instruments. For instance, during the January 2008-February 2009 market correction, the fund lost almost 65 per cent of its value. Higher exposure to sectors such as industrials, metals and materials weighed.

BETTER PERFORMER

A systematic monthly investment of Rs 1,000 in the last five years would have earned barely 8 per cent annually. Had the same amount been invested in HDFC Children’s Gift Investment Plan over a five-year period, it would have fetched almost 15 per cent annually. In the last five years, ICICI Pru Child’s rolling annual return was lower than the benchmark 51 per cent of the time. In contrast, HDFC Children’s Gift Investment managed to outperform the benchmark 67 per cent of the time in the similar period.

HDFC Children’s Gift clocked gains higher than the CRISIL Balanced Index across one-, three- and five-year time periods.

Prudent stock and sector choices helped it consistently manage top quartile performance. The fund scores over ICICI Pru Child on the basis of risk-adjusted performance too.

RECOVERY GAINS

The fund clocked healthy gains during recovery rallies too. For instance, between March 2009 and November 2010, it gained 134 per cent, higher than the 70 per cent for CRISIL Balanced Index. In addition to defensive themes — pharma and consumers — stocks such as Crompton Greaves, Blue Star and Thermax aided performance.

The fund has demonstrated good ability to arrest NAV fall during cyclical downturns. Its strategy to take refuge in defensives — pharma and consumers — during volatile times helped performance.

The fund held 42 stocks in its portfolio at the end of August, which accounted for 70 per cent of total assets. The weighted average market capitalisation of the equity portfolio is in excess of Rs 48,000 crore.

Higher allocation towards IT and pharma may help curb downside in volatile markets.