Debunking the Growth of ICICI Pru Mutual Fund AMC

ICICI Prudential AMC was founded in 1993 as a collaboration between Prudential Plc and ICICI Bank. As of June 2024, the company had Assets Under Management of Rs 7,03,184.98.61 crore. In addition, you will find 118 schemes across equity, debt, hybrid, and other categories.

Here is all you need to know about the ICICI Prudential mutual funds before investing.

Recent Changes in ICICI Funds

Two recent events have contributed to a buzz surrounding this fund house.

1. Restriction on Lumpsum Investment

ICICI Pru AMC has decided to halt lump sum investments into its small and mid-cap schemes starting March 14, 2024. This move responds to the Securities and Exchange Board of India (SEBI) chairperson Madhabi Puri Buch’s warning about the market’s potential ‘froth’ or ‘bubbles’, a concern for sectors traditionally favored by retail investors.

The decision is seen as a measure to protect investors from sudden market movements and volatility. While lump sum investments are paused, the AMC will continue to accept new registrations through systematic investment plans (SIPs) and systematic transfer plans (STPs), with a cap of Rs 2 lakh per Permanent Account Number (PAN) per month per scheme.

This precautionary step has also been influenced by the strong performance of small and mid-cap funds over the past year. The S&P BSE 250 Small Cap TRI and the S&P BSE 150 Midcap TRI indices have surged significantly in the last 52 weeks.

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The upward trend resulting in high returns has led to high valuations, making it challenging for fund managers to find value-driven investment opportunities.

Although this restriction is temporary, the move has somewhat affected the AMC performance.

2. Change in Fund Managers

ICICI AMC has recently changed the fund managers of thirty of its mutual fund schemes. This strategic move involves key funds such as:

  • ICICI Prudential Balanced Advantage
  • ICICI Prudential Liquid
  • ICICI Prudential Multi-Asset Fund

The reshuffle includes both the introduction of new fund managers and the reallocation of existing ones to different schemes.

This decision can be attributed to many factors, including—but not limited to—organizational restructuring, performance optimization, and succession planning.

Fund managers play a major role in executing an investment strategy. Their expertise is crucial for the fund’s sustained performance.

However, investors are generally advised to assess such changes critically but not to react impulsively. It is crucial to consider the fund’s long-term track record and the AMC rather than basing decisions on the change of fund managers alone. The impact of these changes on the funds’ performance will unfold over time.

What to Consider Before Investing in  ICICI Pru AMC?

Whether you wish to invest in ICICI schemes or choose any other fund house from the mutual fund AMC list, it is crucial to consider the following parameters.

  • Review the expense ratio that measures the cost incurred by the fund manager for actively managing the fund. A lower expense ratio can lead to better net returns for investors.
  • Check the Standard Deviation. This metric indicates the volatility of the fund’s returns. A higher standard deviation suggests greater risk due to more significant return fluctuations.
  • Assess the Sharpe Ratio, which evaluates a mutual fund’s risk-adjusted performance. If this ratio is on the higher side, expect better risk-adjusted returns.
  • Evaluate Alpha, which measures a fund’s performance relative to its benchmark. Choose the scheme if it has a positive Alpha that indicates that the fund has outperformed its benchmark on a risk-adjusted basis.
  • Read Beta. It reflects the sensitivity of the fund’s returns to market movements. A beta greater than one suggests higher volatility, while a beta less than one shows lower volatility than the market.
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While the ICICI Pru AMC has shown impressive growth, investors and market watchers should look deep into each fund’s ratio and portfolio composition to understand the true picture.
Happy Investing!

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