ICICI Prudential Infrastructure Fund is an open-ended equity fund that invests in infrastructure sectors such as cement, power, telecom, oil and gas, construction and banking. The fund is among the best performers in the infrastructure sector category. It offers the best of both the worlds ó high returns during a bull phase and arrested decline during a bear phase. This is clearly evident from the fundís performance during the current slump since January, where the fund has lost much less than its benchmark. Over the one-, two- and three- year horizons, it has emerged as the best-performing infrastructure fund. A look at the Sharpe ratio of the fund instils confidence in the fundís ability to offer higher risk-adjusted returns.
The fund adopts a mixed approach of top-down macro research and bottom-up micro research to identify stocks. It is a multi-sector fund. One of the reasons for the superior performance of the fund is the active cash calls made by the fund management. Till December 2007 the fund held only 86 per cent in equities. In January, when the markets slumped, the fundís allocation to equity had gone up to 96 per cent. Since then this exposure has come down to 65.28 per cent. The returns delivered over the past six months show that the strategy has worked well, at least in capping the decline in the NAV of the fund.
The allocation to various sectors sets this fund apart from the ordinary infrastructure fund. It has always been underweight on the construction and engineering sectors compared to other infrastructure funds. At the same time, the fund invested aggressively in the banking and finance space and in steel companies. However, there has been a slight change in sector preferences of late: the share of banking scrips has declined since the beginning of this year. The fund has adopted a prudent strategy by containing allocation to construction and engineering sectors, as the rally in these sectors was followed by a severe correction.
One would not ideally recommend a thematic fund as a core holding. However, the diversified nature of ICICI Prudential Infrastructureís portfolio allows it to be included as a core holding. Further, the ability to contain the decline in NAV during a bear phase while delivering high returns during a bull run makes it a robust, all-weather fund. ó Deepali Manel