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Prudential ICICI Income

Dhirendra Kumar

Background

Prudential ICICI Income Plan (PIIP) is an open-end bond fund launched in June 1998. The dividend option of the fund has paid a cumulative dividend of 28.2 per cent. A no-load fund, redemption within six months carries a 0.5 per cent charge. The scheme facilitates easy liquidity through instacheque in metros and Bangalore. Under this option, investors can get an instant cheque for redemption in excess of Rs 50,000 or balance in account, whichever is lower. Redemption here would be based on previous day's NAV.

Performance

Backed by a massive corpus of Rs 2331 crore, the fund offers stability with returns. The size is a strong guard against redemption pressure since even small cash position can take care of reasonable repurchases and the fund can be almost fully invested. PIIF has handled the growing corpus dexterously by steering clear of credit and liquidity risks. It continues to deploy a greater part of assets in triple A rated securities which have averaged around 87 per cent of the corpus in the last year. At the same time, the fund seeks to pep up its returns with a marginal exposure to unrated and AA instruments, which has averaged at 12%.

FUND BASICS   Objective    Size (Cr)    NAV:04/04/2001    Exit Price    Entry Price    Total Return   Income   2078.18   13.86   13.86   13.86   12.39%

Further, the fund has held the interest risk at bay by holding an internal limit of 4 years on portfolio maturity. While bond prices and interest rates move in opposite direction, a lower maturity portfolio means lesser impact of interest rate fluctuations. The fund actively realigns maturity with interest rate outlook by leveraging the gilt exposure. These instruments, besides offering high liquidity also provide scope for trading profits.

With this conservative strategy, PIIF has emerged a moderate risk fund to offer a return of 12.39 per cent since launch. For the two year ending March 2001, the fund has posted a return of 12.67 per cent against a category average of 12.40 per cent. While the fund has well leveraged its asset base to earn above average returns, the lower expenses associated with a large sized fund are yet to be reflected. According to the fund manager, since PIIF is a no-load fund, the brokerage and trail commission is paid from total expenses, leading to higher annual charges.

BENCHMARK COMPARISONS (%)      1M    3M    6M    1Yr    3Yr   Fund   0.36   3.82   7.78   11.33   -   I-Bex Tot.   -0.31   5.03   10.29   13.39   14.10   Obj. Avg.   0.36   3.80   7.41   11.05   12.10

Outlook

With a secular growth in corpus, PIIF has emerged to be a stable sized fund. With its emphasis on safety and steady returns, the fund offers attractive returns with moderate risk.

   

Top Holdings (28/02/2001)      Value (Cr.)    % of Assets   IDBI   173.88   7.46   G E Capital Ser.   147.08   6.31   Reliance Ind.   143.35   6.15   GOI 2010   99.29   4.26   GOI 2009   98.59   4.23   GOI 2006   75.52   3.24   HDFC   71.56   3.07   SBI   70.16   3.01   GOI 2011   67.36   2.89   I C I C I   56.87   2.44   IR&FC   53.14   2.28   GOI 2007   51.28   2.20   Power Finance Corp.   44.99   1.93   Grasim Ind.   44.29   1.90   Larsen & Toubro   44.05   1.89

Source: Value Research

Money

Fund File

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