ICICI Pru Balanced Advantage Fund: Showcasing Commendable Long-term Performance

ICICI Prudential Balanced Advantage Fund is a Balanced Advantage Fund, that dynamically balances investments in both equity and debt to provide growth alongside stability. Its focus on long-term investments and prudent risk management approach has resulted in remarkable returns for investors.

ICICI Prudential Balanced Advantage Fund stands as one of the longest-standing schemes in its category, boasting a track record spanning over 17 years. Categorised as a Balanced Advantage Fund, ICICI Prudential Balanced Advantage Fund dynamically manages its allocation between equity and debt to offer investors the benefit of portfolio rebalancing in line with the dynamic market conditions. It uses an in-house model to assess the valuations and decide the equity level in the portfolio. However, the fund maintains an equity allocation of a minimum of 65% at all points in time to retain the status of equity taxation.

In case the equity valuations move up, the fund achieves the desired equity level with the help of derivatives. ICICI Prudential Balanced Advantage Fund also actively manages the debt portion to offer a cushion against phases of intense market volatility. Despite witnessing bouts of underperformance in the short term, ICICI Prudential Balanced Advantage Fund holds a commendable long-term performance of outpacing most of its peers. Consequently, the fund's corpus has increased manifold over the years, making it the second-largest scheme in the category having an AUM of Rs 56,175 crore as of March 2024.

The fund's strategy of maintaining a diverse portfolio spread across equity and debt segments and backed by strong processes led by an experienced fund management team, has worked in its favour. In the last 5 years, ICICI Prudential Balanced Advantage Fund has grown at a CAGR of 13.4% compared to a growth of 14.3% in the CRISIL Hybrid 35+65 Aggressive index. An investment of Rs 10,000 in the fund five years ago would now be worth Rs 18,795, whereas a simultaneous investment in the index would have now appreciated to Rs 19,491.

In previous years, ICICI Prudential Balanced Advantage Fund consistently outperformed many peers within the Balanced Advantage Fund category, often by a significant margin. However, its performance lagged behind several prominent peers over the last 1-year period, impacting its returns. Nonetheless, ICICI Prudential Balanced Advantage Fund maintains commendable long-term performance. Over extended 5-year and 7-year periods, it consistently ranks among the top quartile performers in the category and closely mirrors the CRISIL Hybrid 35+65 Aggressive index.

Moreover, ICICI Prudential Balanced Advantage Fund distinguishes itself with superior risk-adjusted returns, demonstrating notably lower volatility compared to peers and the CRISIL Hybrid 35+65 Aggressive index. Additionally, its Sharpe Ratio (0.43) stands out as one of the best in the category, exceeding that of the index.

[Read: Why Balanced Advantage Funds Make Sense in the Current Volatile Market Conditions]

What is the investment strategy of ICICI Pru Balanced Advantage Fund?

ICICI Prudential Balanced Advantage Fund dynamically allocates its net assets to equity and equity-related securities and debt instruments depending on various factors such as economic scenarios, global events, market valuations, interest rate movement, etc. The fund typically maintains equity exposure between 65-100%, though the net equity exposure can be brought down below 65% through various derivative strategies for hedging/portfolio rebalancing purpose.

For the equity portion, the scheme follows the top-down approach to identify growth sectors and the bottom-up approach to identify individual stocks. It focuses on companies growing at a rapid pace but are available at attractive valuations. For the debt portion, the fund invests in securities issued by the government, public sector undertakings, and private companies with an aim to generate accrual income and potential capital appreciation.

As of March 31, 2024, ICICI Prudential Balanced Advantage Fund allocated about 68% of its assets in equities. The fund held 88 stocks in its portfolio with the top 10 holdings accounted for nearly 32.4% of its total assets. ICICI Prudential Balanced Advantage Fund has higher allocation to bluechips such as ICICI Bank, TVS Motor Company, Maruti Suzuki India, HDFC Bank, and Infosys. The fund has capped allocation in each stock to under 5%. It holds most of its stocks with a long-term view and accordingly, the fund usually records a low portfolio turnover of around 15-30%.

In the last two years, ICICI Prudential Balanced Advantage Fund has benefited the most from its holdings in TVS Motor Company, ICICI Bank, Mahindra & Mahindra, and NTPC that collectively contributed about 11% to its absolute gains. The fund has also gained from its exposure to Bharti Airtel, L&T, SBI, ONGC, Maruti Suzuki India, ITC, Sun Pharma, Axis Bank, and Reliance Industries, among many others. Meanwhile, it booked profits in NCC, Avanti Feeds, Oil India, NHPC, Jio Financial Services, HDFC AMC, Chambal Fertilisers, Exide Industries, Torrent Pharma, Hindustan Aeronautics, Tata Communications, and Sundaram Finance, among others.

ICICI Prudential Balanced Advantage Fund's portfolio is skewed towards Cyclical with reasonable exposure to Defensive and Sensitive sectors. Currently, the fund has a preference for holdings in the Banking and Auto sectors, constituting a combined allocation of around 23.4%. The fund also holds substantial exposure to Consumption, Infotech, Finance, Pharma, Retail, and Petroleum having allocation in the range of 3-7%. The top 5 sectors account for about 41.7% of its assets.

ICICI Prudential Balanced Advantage Fund currently holds allocation of around 24.7% in debt instruments. Its portfolio comprises moderate to high rated debt instruments along with minor allocation to low rated instruments. The fund currently holds predominant exposure to long duration Sovereign rated G-Secs and treasury bills (16.2%) and low to high-rated Corporate Debt Instruments (8.1%). The average maturity of the debt portfolio is currently around 5.5 years which makes it moderately sensitive to interest rate changes.

Is ICICI Pru Balanced Advantage Fund suitable for my investment goals and risk tolerance?

Despite instances of short-term underperformance, ICICI Prudential Balanced Advantage Fund has demonstrated an impressive performance over longer time periods. Its focus on long-term investments and prudent risk management strategies enables it to generate competitive returns, rewarding investors who aim to stay invested in the fund with a long-term horizon. The fund has achieved this without exposing the portfolio to excess risk.

While ICICI Prudential Balanced Advantage Fund usually leans towards large-cap stocks, it possesses the flexibility to alter its market capitalisation allocation within the portfolio according to segment valuations and prevailing market conditions. Within the fund's debt portfolio, a significant portion is dedicated to highly liquid sovereign-rated G-Secs, supplemented by allocations to moderate to high-rated corporate debt instruments, and a minor portion to lower-rated instruments.

ICICI Prudential Balanced Advantage Fund is suitable for investors looking for a reliable performer within the Balanced Advantage Fund category and having an investment horizon of at least 3-5 years.

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Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

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DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

DISCLOSURE AS PER SECURITIES AND EXCHANGE BOARD OF INDIA (RESEARCH ANALYSTS) REGULATIONS, 2014

About the Company including business activity

Quantum Information Services Private Limited (QIS) was incorporated on December 19, 1989.

QIS was promoted by Mr Ajit Dayal with an objective of providing value-based information/views on news related to equity markets, the economy in general, sector analysis, budget review and various personal products and investments options available to the Public. It was the first company to start equity research on an institutional level.

'PersonalFN' is a service brand of QIS and was started in the year 1999. In 1999, the Company registered the Domain name www.personalfn.com for providing information on mutual funds and personal financial planning, financial markets in general, etc. and services related to financial planning and research in various financial instruments including mutual funds, insurance and fixed income products to customers. It offers asset allocation and researched investment recommendations through its financial planning services.

Quantum Information Services Private Limited (QIS) is registered as Investment Adviser under SEBI (Investment Adviser) Regulations, 2013 and having Registration No.: INA000000680. In terms of the second proviso to Regulation 3 (1) of SEBI (Research Analysts) Regulations, 2014 the Company is not required to obtain Certificate of registration from SEBI.

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Details of associates

• Group Companies including:

  1. Money Simplified Services Private Limited;

  2. PersonalFN Insurance Services India Private Limited;

  3. Equitymaster Agora Research Private Limited;

  4. Common Sense Living Private Limited;

  5. Quantum Advisors Private Limited;

  6. Quantum Asset Management Company Private Limited;

  7. HelpYourNGO.com India Private Limited;

  8. HelpYourNGO Foundation;

  9. Natural Streets for Performing Arts Foundation;

  10. Primary Real Estate Advisors Private Limited;

  11. HYNGO India Private Limited;

• Directors of the Company - Suresh Lulla; I V Subramaniam, Murali Ananthan Krishnan and Rafiq Dossani

1. ‘subject company’ is a scheme on which a buy/sell/hold view or target price is given/changed in this Research Report;

2. Neither QIS, it's Associates, Research Analyst or his/her relative have any financial interest in the subject Company;

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4. Neither QIS, it's Associates, Research Analyst or his/her relative has any other material conflict of interest at the time of publication of the research report except that QIS (PersonalFN) is, as per SEBI (Mutual Funds) Regulations 1996, an associate / group Company of Quantum Asset Management Company Private Limited and Trustees and Sponsor of Quantum Mutual Fund (QMF) and to that extent there may be conflict of interest while recommending any schemes of QMF. However, any such recommendation or reference made is based on the standard evaluation and selection process, which applies uniformly for all Mutual Fund Schemes. The payment of commission (upfront / annualized & trail), if any, for any Schemes by QMF to QIS (PersonalFN) is also at arm's length and as per prevailing market practices.

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Quantum Information Services Private Limited CIN: U65990MH1989PTC054667 Regd. & Corp. Office: 103, Regent Chambers, 1st Floor, Nariman Point, Mumbai - 400 021

Email:info@personalfn.com Website: www.personalfn.com Tel.: 022 61361200 Fax.: 022 61361222 SEBI-registered Investment Adviser. Registration No. INA000000680, SEBI (Investment Advisers) Regulation, 2013

Investment in securities market are subject to market risks, read all scheme related documents carefully.