ICICI Prudential Retirement Fund: Worthy For Your Retirement Planning?
Feb 12, 2019

Author: Aditi Murkute

(Image source: freepik.com)

ICICI Prudential Retirement fund is a solutions-oriented scheme focussed on achieving retirement goals by investing in a mix of different asset classes like equity, equity related instruments, fixed income securities and other securities.

With the changing demographics and social patterns, planning for your retirement has become pivotal.

With this intent, the ICICI Prudential Mutual fund designed this scheme to help investors plan for their dream retirement life.

ICICI Prudential Retirement Fund is an open-ended scheme with a lock-in for at least 5 years or till the one attains retirement. The Scheme offers 4 distinct variants of investments -

Pure Equity,
Hybrid-Aggressive Plan,
Hybrid-Conservative Plan and
Pure Debt Plan to invest.

The four variants are designed such that, based on the individual's age, risk-taking ability the type of returns they want and time horizon of investment. For a young investor investing in the Pure Equity Plan is a worthy choice as he has number of years to grow his wealth and has a high-risk appetite. But for retired individual investing in Pure Debt Plan is a better option as the equity related investment risk is eliminated by investing in debt funds and money market instruments. Also, the risk is less as compared to equity.

[ Read: Why Comparing Returns to Risk Is More Meaningful!]

Image1: Investment option suitability

(Source: ICICI Prudential Retirement Fund Brochure - Distributor)

Table 1: NFO Details

Type	An open-ended retirement solution-oriented scheme having a lock-in of 5 years or till retirement age (whichever is earlier)			Category		Special solution-oriented scheme (retirement fund)
Investment Objective	The investment objective of the scheme is to provide capital appreciation and income to the investors which will help to achieve retirement goals by investing in a mix of securities comprising of equity, equity related instruments, fixed income securities and other securities. Investment objectives of 4 investment plans under the Scheme are as given below: Pure Equity Plan: To generate long-term capital appreciation and income generation to investors from a portfolio that is predominantly invested in equity and equity-related securities. Hybrid Aggressive Plan: An open-ended hybrid scheme predominantly investing in equity and equity related securities to generate capital appreciation. The scheme may also invest in Debt, Gold/Gold ETF/units of REITs & InvITs and such other asset classes as may be permitted from time to time for income generation/wealth creation. Hybrid Conservative Plan: To generate regular income through investments predominantly in debt and money market instruments. The Scheme also seeks to generate long term capital appreciation from the portion of equity investments under the Scheme. Pure Debt Plan: To generate income through investing in a range of debt and money market instruments of various duration while maintaining the optimum balance of yield, safety and liquidity. However, there can be no assurance or guarantee that the investment objective of the plan would be achieved.
Min Investment	Rs 5,000 and in multiples of Re 1 thereafter			Face Value		Rs 10 per unit
Investment Plans	Pure Equity Hybrid Aggressive (default option) Hybrid Conservative Pure Debt	Plans	Direct Regular		Options	Growth* Dividend Pay-out only *Default option
Entry Load	Not Applicable			Exit Load		Nil
Fund Manager	Equity portion - Mr Mrinal Singh and Mr Ashwin Jain Debt portion - Mr Manish Banthia and Anuj Tagra			Benchmark Index		Pure Equity - NIFTY 500 Index Hybrid Aggressive - CRISIL Hybrid 35+65 - Aggressive Index Hybrid Conservative - NIFTY 50 Hybrid Composite Debt 15:85 Index Pure Debt - NIFTY Composite Debt Index
Issue Opens	February 07, 2019			Issue Closes:		February 21, 2019

(Source: Scheme Information Document)

How will ICICI Prudential Retirement fund allocate its assets?

Under normal circumstances, the asset allocation of the Investment Plans under the Scheme would be as follows:

Pure Equity Plan:

Table 2a: Asset allocation for Pure Equity Plan

Instruments	Indicative allocation (% of total assets)		Risk Profile
Instruments	Maximum	Minimum	High/Medium/Low
Equities and Equity related instruments	100	80	Medium to High
Debt and money market instruments	20	0	Low to Medium

(Source: Scheme Information Document)

The Scheme may also take exposure to:

ADR/GDR/Foreign securities/Overseas ETFs up to 50% of the Net Assets.
Derivatives (including imperfect hedging) instruments up to 100% of the Net Assets.
Securitised Debt up to 5% of the Net Assets or maximum permissible limit for debt portfolio, whichever is lower.
Stock lending up to 50% of its net assets.

Hybrid Aggressive Plan:

Table 2b: Asset allocation for Hybrid Aggressive Plan

Instruments	Indicative allocation (% of total assets)		Risk Profile
Instruments	Maximum	Minimum	High/Medium/Low
Equities and Equity related instruments	100	65	Medium to High
Debt and money market instruments	35	0	Low to Medium
Gold, Gold ETFs, REITs and INVITs and any other security permitted by SEBI from time to time (subject to applicable limits)	35	0	Medium to High

(Source: Scheme Information Document)

The Scheme may also take exposure to:

Derivatives (including imperfect hedge) instruments up to 100% of the Net Assets.
Stock lending up to 50% of its net assets.
ADR/GDR/Foreign securities/Overseas ETFs up to 50% of the Net Assets.
Securitised Debt up to 15% of the Net Assets or maximum permissible limit for debt portfolio, whichever is lower.

Hybrid Conservative Plan:

Table 2c: Asset allocation for Hybrid Conservative Plan

Instruments	Indicative allocation (% of total assets)		Risk Profile
Instruments	Maximum	Minimum	High/Medium/Low
Debt Securities, money market instruments	95	70	Low to Medium
Equities and Equity related instruments	30	5	Medium to High
Units issued by REITs and InvITs	10	0	Medium to High

(Source: Scheme Information Document)

The Scheme may also take exposure to:

Derivatives (including imperfect hedge) instruments up to 100% of the Net Assets.
ADR/GDR/Foreign securities/Overseas ETFs up to 50% of Net Assets.
Securitised Debt up to 50% of the debt portfolio.
Stock lending up to 20% of its net assets

Pure Debt Plan:

Table 2d: Asset allocation for Pure Debt Plan

Instruments	Indicative allocation (% of total assets)		Risk Profile
Instruments	Maximum	Minimum	High/Medium/Low
Debt and Money market instruments	100	0	Medium to High
Units issued by REITs and InvITs	0	0	Low to Medium

(Source: Scheme Information Document)

Investment in Debt & Money Market instruments across the duration. The Scheme may also take exposure to:

Securitized debt up to 50% of the net assets of the Scheme.
Derivatives (including imperfect hedge) up to 100% of the net assets of the Scheme.
For each of the investment plans, the cumulative gross exposure to equity, debt and derivatives positions shall not exceed 100% of the net assets of the investment plans.

Each Investment plans viz., Pure Equity Plan, Hybrid Aggressive Plan, Hybrid Conservative Plan and Pure Debt Plan will have a separate portfolio.

What will be the Investment Strategy?

Pure Equity Plan:

For the equity portion of the corpus, the fund managers intend to invest in stocks across the market cap. Stock specific risk will be minimized by investing only in those companies that have been thoroughly analysed by the Investment team at the AMC. The investment plan may also invest in Debt and Money Market Securities/Instruments (Money Market securities include cash and cash equivalents)

The "Pure Equity Plan" may also invest a part of its corpus in overseas markets in Global Depository Receipts (GDRs), ADRs, overseas equity, bonds and mutual funds and such other instruments as may be allowed under the Regulations from time to time.

The investment plan may engage in Stock Lending activities.

The investment plan may invest in derivatives such as Futures & Options and such other derivative instruments like Stock/ Index Futures, Interest Rate Swaps, Forward Rate Agreements or such other derivative instruments as may be introduced and permitted by SEBI from time to time. It may invest in derivative for the purpose of hedging, portfolio balancing and other purposes as may be permitted under the Regulations.

The investment plan may also invest in Debt and Money Market Securities/Instruments (Money Market securities include cash and cash equivalents). The investment plan may invest in securitised debt.
Hybrid Aggressive Plan

The Hybrid Aggressive Plan proposes to invest across asset classes, in line with the asset allocation mentioned in the SID, with the aim of generating capital appreciation. With this aim, the Investment Manager will allocate the assets of the investment plan between Equity, Debt, Gold/Gold ETF/commodities and units of REITs & InvITs. The actual percentage of investment in the asset class will be decided after considering the prevailing market conditions, the macroeconomic environment (including interest rates and inflation), the performance of the corporate sector, the equity markets and general liquidity and other considerations in the economy and markets.

The investment plan proposes to take long term call on stocks, which in an opinion of the Fund Manager offer better return over a long period. In the stocks selection process, the fund managers propose to consider stocks with long-term growth prospects but currently trading at modest relative valuations.

The investment plan proposes to concentrate on business and economic fundamentals driven by in-depth research techniques, employing strong stock selection. The stock-picking process proposed to be adopted is generally a bottom-up approach, seeking to identify companies with above average profitability supported by sustainable competitive advantages and to use a top-down discipline for risk control by ensuring representation of companies from various industries.

In case of Debt and Money Market securities, the scheme aims to identify securities which offer an optimal level of yields/returns, considering risk-reward ratio. With the aim of controlling risks, rigorous in-depth credit evaluation of the securities proposed to be invested in will be carried out by the Risk Management team of the fund managers. The credit evaluation includes a study of the operating environment of the issuer, the short as well as long-term financial health of the issuer.

The investment plan could invest in Fixed Income Securities issued by government, quasi government entities, corporate issuers, structured notes and multilateral agencies in line with the investment objectives of the Scheme and as permitted by SEBI from time to time.

The investment plan will also invest in the appropriate commodity or gold or gold ETF in order to achieve the investment objective. The investment plan may also invest in Units issued by REITs & InvITs after doing due research on the same.
Hybrid Conservative Plan

With the aim of controlling risks, rigorous in-depth credit evaluation of the securities proposed to be invested in will be carried out by the Risk Management team of the fund managers. The credit evaluation includes a study of the operating environment of the company, the past track record as well as the prospects of the issuer, the short as well as longer-term financial health of the issuer.

Given that the liquidity of certainly fixed income instruments could be limited, the fund managers will try to provide liquidity by staggering maturities for various instruments, as well as holding enough portion of the portfolio in more liquid government and corporate paper as well as money market securities.

The "Hybrid Conservative Plan" can also invest in equity and equity related instruments into companies across market capitalization. The fund managers in selecting scrips will focus on the fundamentals of the business, the industry structure, the quality of management, sensitivity to economic factors, the financial strength of the company and the key earnings drivers.

The investment plan may also invest in REITs and INVITs.

The investment plan may invest in derivatives instruments to the extent as permitted by SEBI. It may also invest in securitized debt. Hedging using Interest Rate Futures could be perfect or imperfect, subject to applicable regulations.
Pure Debt Plan

The ―Pure Debt Plan‖ aims to identify securities which offer an optimal level of yields/returns, considering risk-reward ratio. An appropriate mix of debt market securities and money market securities will be used to achieve this. Money Market securities include cash and cash equivalents. The investment plan will invest across duration.

With the aim of controlling risks, rigorous in-depth credit evaluation of the securities proposed to be invested in will be carried out by the Risk Management team of the fund managers. The credit evaluation includes a study of the operating environment of the company, the past track record as well as the prospects of the issuer, the short as well as longer-term financial health of the issuer.

The FUND MANAGERS may consider the ratings of such Rating Agencies as approved by SEBI to carry out the functioning of rating agencies. In addition, the investment team of the FUND MANAGERS will study the macroeconomic conditions, including the political, economic environment and factors affecting liquidity and interest rates. The FUND MANAGERS would use this analysis to attempt to predict the likely direction of interest rates and position the portfolio appropriately to take advantage of the same.

Further, the investment plan may invest in other schemes managed by the AMC or in the Schemes of any other Mutual Funds, provided it is in conformity with the prevailing Regulations. As per the Regulations, no investment management fees will be charged for such investments.

The investment plan may use derivative instruments like Interest Rate Swaps, Interest Rate Futures, Forward Rate Agreements or other derivative instruments for the purpose of hedging, portfolio balancing and other purposes, as permitted under the Regulations. Hedging using Interest Rate Futures could be perfect or imperfect, subject to applicable regulations. Usage of derivatives may expose the investment plan to certain risks inherent to such derivatives. It may also invest in securitized debt.

For the present, the investment plan does not intend to enter underwriting obligations. However, if the investment plan does enter into an underwriting agreement, it would do so with the prior approval of the Board of the AMC/Trustees.

Who will manage the ICICI Prudential Retirement Fund?

Mr Mrinal Singh and Mr Ashwin Jain will manage the Equity portion and Mr Manish Banthia and Mr Anuj Tagra will manage the debt portion of the ICICI Prudential Retirement fund.

Mr Mrinal Singh holds a bachelors' degree in electronics engineering and has a PGDM (Finance). He has an overall experience of around 14 years. He is associated with ICICI Prudential Asset Management Company Limited since June 2008. Prior he worked at Wipro Ltd - IT Services and BOSCH India (erstwhile MICO) - R&D.

Some of the funds he manages are ICICI Prudential Business Cycle Fund - Series 1, ICICI Prudential Dividend Yield Equity Fund, ICICI Prudential Midcap Fund, ICICI Prudential Focused Equity Fund, ICICI Prudential Value Discovery Fund, ICICI Prudential Value Fund - Series 10 , ICICI Prudential Value Fund - Series 4, ICICI Prudential Value Fund - Series 5, ICICI Prudential Bharat Consumption Fund - Series 2 and ICICI Prudential Growth Fund - Series 2

Mr Ashwin Jain holds a bachelors' degree in electronics engineering and is an MBA from IIM Bangalore. He is associated with ICICI Prudential Asset Management Company Limited from 2010 till date. Before joining the fund house, he worked as a Senior Analyst at Merill Lynch, at Irevna (part of the Standard & Poor's Group) he was a Research Analyst and at HCL Technologies he joined as a Software Engineer.

Currently, at the fund house, some of the other schemes he manages are ICICI Prudential Child Care Fund (Gift Plan), ICICI Prudential Exports and Services Fund, ICICI Prudential Growth Fund - Series 3, ICICI Prudential Technology Fund, ICICI Prudential Value Fund - Series 14 and ICICI Prudential Value Fund - Series 19.

Mr Manish Banthia is a Commerce Graduate with an MBA to his credit along with CA. He is associated with ICICI Prudential Asset Management Company Limited since October 2005. Before joining the fund house, he was with Aditya Birla Nuvo Ltd and Aditya Birla Management Corporation Ltd.

Mr Anuj Tagra has done his bachelor's in Business Administration and has an MBA in Capital Markets. He is associated with ICICI Prudential Asset Management Company Limited from February 2013. Prior to joining the fund house, he worked at Union Bank of India - Trader-G-sec and at Fidelity Investments as Associate in Operations

He manages ICICI Prudential Gilt Fund, ICICI Prudential All Seasons Bond Fund and ICICI Prudential Multi-Asset Fund at the fund house.

Ms Priyanka Khandelwal is a commerce graduate and cleared CFA - Level 1 from Chartered Accountant Company Secretary. She is associated with ICICI Prudential Asset Management Company from October 2014.

She handles the Overseas investments for schemes which have the mandate to make overseas investments. ICICI Prudential US Bluechip Equity Fund and ICICI Prudential Global Stable Equity Fund are the ones which she manages.

The outlook for ICICI Prudential Retirement Fund

The ICICI Prudential retirement fund is a basket of 4 fund options suitable for an individual's risk appetite, keeping the core objective of ensuring long term wealth accumulation for retirement.

Pure Equity Plan:

Since it is pure equity, this plan has the highest risk and this year is bound to be volatile for equities. it could test the patience of several investors. We are in an election mode in the run-up to Lok Sabha elections in April-May 2019, and surrounded by factors viz. loss in economic momentum, pace of job creation is very slow, farm loan waiver and increased Minimum Support Prices (MSP) may weigh on fiscal deficit, domestic liquidity has been surreal, and people, in general, seem disgruntled after high hopes of Acche Din.

Hence, constructing the portfolio would be a challenging task for the fund manager, and if the Indian equity markets hit more turbulence ahead it may inflict extremely high-risk.

Invest in this plan only if:
- You have a very high-risk appetite
- You can stay invested for 7-10 years without getting perturbed
Hybrid Aggressive Plan:

Even the asset allocation of the fund under this plan option is skewed more towards the equities segment with some portion to debt and other securities to mitigate the risk. As mentioned above the fund managers will face a challenging time in the construction of the portfolio. This is because of the year of 2019 volatility.

Hence this plan option is suitable only for investors who are willing to take high risk and have an investment time horizon of more than 5 years.
Hybrid Conservative Plan

This is suitable for people who seek regular income and have an investment time horizon of 5 years and willing to bare a moderate level of risk. As mentioned, the investments made will be under Government scrips, But the portfolio construction is a challenging task as debt markets to are facing troubled waters.
Pure Debt Plan

The risk is least as compared to the equity funds and suitable for people who want regular income and have a time horizon of 3 years. As an investor, this is not completely risk-free. Factors such as inflation, the direction of policy rates, currency movement, fiscal deficit, and the consequent impact on yields, plus the ratings assigned to debt papers held in the portfolio, etc. will weigh on the potential performance of the scheme.

How the fund managers construct the portfolio to deal with the risk that could weigh down the performance remains to be seen. The fortune of the fund will be ultimately linked to the quality of corporate bonds, debt papers and money market instruments held in the overall portfolio.

[Read: Skip NFOs, Instead Consider Building A Strategic Mutual Fund Portfolio]

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