Tuesday, November 29, 2022
HomeFinanceFund Profile: ICICI Prudential Financial savings Fund

Fund Profile: ICICI Prudential Financial savings Fund


On this version of the debt fund profile, we take a look at ICICI Prudential Financial savings Fund. That is an open-ended Low Length debt scheme investing in devices such that the Macaulay length of the Portfolio is between 6 months and 12 Months.

The fund’s class, “Low Length”, offers one the impression that it’s appropriate for short-term wants.  Sadly, this isn’t true. If we take a look at the risk-class matrix, the credit score danger is average, and the rate of interest danger is comparatively excessive. To know the Macaulay length, see the Fund profile: SBI Magnum Extremely Brief Length Fund.

It appears foolish for a fund with a comparatively high-interest price danger to be categorised as a “low length” fund, however there you might be!

The historic yield to maturity, common portfolio maturity and modified length (a measure of rate of interest sensitivity) are proven under.

YTM, average maturity and modified duration history of ICICI Pru Savings Fund
YTM, common maturity and modified length historical past of ICICI Pru Financial savings Fund

The yields have elevated just lately as a result of price hike. The typical maturity has elevated over the past two years, however the modified length has remained unchanged. The fund has a median maturity of  5.59 years and a modified length of solely 0.78Y.

SEBI RIA Avinash Luthria defined that this may very well be due to the dominant presence of floating-rate bonds and a few interest-rate swaps within the portfolio. For instance,  GOI FRB 22-Sep-2033. Though this can be a long run bond, since it’s a floating price bond, its worth won’t fluctuate as a lot due to rate of interest adjustments due to its variable coupon price. See, for instance: How Floating Fee Debt Mutual Funds Scale back Curiosity Fee Danger. The rate of interest swaps additionally render a portion of bonds as successfully floating-rate. Additionally see Curiosity Fee Swaps: A manner for MFs to cut back rate of interest danger. These have allowed the fund to purchase long-term bonds whereas holding the modified length low.

The five-year rolling returns of ICICI Pru Financial savings Fund, ICICI Pru Brief Time period Fund, ICICI Pru Cash Market Fund and ICICI Pru Gilt Fund are plotted under. The Financial savings fund has a reasonably steady return profile for 5 years.

5-year rolling returns of ICICI Pru Financial savings Fund vs ICICI Pru Brief Time period Fund vs ICICI Pru Cash Market Fund vs ICICI Pru Gilt Fund.

The maturity profile of the fund is proven under. The rise in publicity to above-5-year bonds is seen under. These bonds represent about half the portfolio.

Maturity profile history of ICICI Pru Savings Fund
Maturity profile historical past of ICICI Pru Financial savings Fund

Lastly, the credit standing historical past is proven under. A lot of the high-duration debt is from gilts. The credit score danger is non-zero however moderately low.

Credit rating history of ICICI Pru Savings Fund
Credit standing historical past of ICICI Pru Financial savings Fund

The fund could be thought of by those that want to make investments for 5 years or extra and maybe even a much less risky substitute for gilt funds. Nonetheless, the portfolio has sufficient rate of interest danger to trigger the NAV to wobble and the potential of credit score occasions. So one can’t purchase and neglect however should hold monitor of the portfolio through fund factsheets.

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