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Tuesday 8 October 2013

ICICI Pru Value Fund Series 1

Those who missed IDFC Small cap closed ended fund 6 months before, get an another opportunity to enter this time with ICICI Pru Value Fund.
Generally, Mutual funds are classified as Large cap, Midcap and Small cap. If you look at the performance between 2003 and 2013, large cap delivered 21.81%, Midcap as 25.14% and Small cap as 24.24% CAGR.
If we split these 10 years into 2 half, first half is a bull market and 2nd half is the bearish or volatile market.
In the bull phase, large cap delivered 48.9%, Midcap as 59.94% and Small cap as 74.67% CAGR. If you look at the percentage, you will not appreciate much, but if you look at the multiples large cap multiplied by 5.7 times, Midcap as 8.4 times and Small cap as whopping 13.34 times!
If you look at the indices for the past 5 years, Large indexes are slightly positive, but Small cap index absolute return is more than -24.97% and Midcap is -20%, itself is a very big Opportunity!
Small Cap
Indices Value
Percentage
1-Jan-08
7452

7-Oct-13
5591


Difference
-24.97%
Mid Cap


1-Jan-08
7197

7-Oct-13
5757


Difference
-20.01%
Sensex


1-Jan-08
19580
95.53%
7-Oct-13
19895


Difference
1.61%
Why One Should Invest This Fund?
1.     For any 8 years rolling return of Sensex only two instances it gave negative returns of -1.06% and -0.84% out of 27, two is negative.
          If we go little deeper, in those two periods, before 5 years SENSEX has multiplied by 5 times and 4.5 times. In our case, we are at the same level. So there is no possibility of coming down in the next 3 years, for sure.
2.     If you look at the elections year between 1991 and 2009 where 6 elections held, of which 5 times the market has given very good return after the elections and the only one occasion it was not given because the previous 5 years was also a bull market.
3.     When the markets turns from bear to bull the value stock will do extremely well, one such occasion we have witnessed in the calendar year 2009, ICICI Pru Discovery one of the value fund in the market has delivered 128% in a single year which means your 1 Lakh investment becomes 2,28,000.
4.     Many investors are not happy today with 3 years lock-in because of many funds which came around 2007-2008 at peak delivered poor returns. At the same time, in the bearish market this will work exactly opposite, because you will not be allowed to take money and at the same time fund manager can invest in a value fund without worrying the redemption pressure.
5.     This fund looks like miniature of discovery fund and this fund also going to Manage Mr. Shankar Naren who managed ICICI Pru Discovery Fund before along with Mr. Mittul Kalawadia.
6.     Today, the value of the index may be at same level or 25% discount, but if you look at the individual stock most of the stocks are available for more than 50% discount. If anybody regularly following the market will understand we are heading towards BIG bullish market.
7.     If you believe in the next 5 years, small cap will do better than other caps then there is an opportunity available right now.
8.     ICICI Pru Mutual Fund has come out with ICICI Pru Value Fund, which is a closed ended 3 years fund with dividend payout option only.
9.     Personally, I believe small and midcap cap will do in the next 3 to 5 years and many small cap funds are available currently in the market, all are open ended. The problem with the open ended fund is, there will be regular redemption pressure and regular inflow also and good numbers of funds are already beaten.
10.                         Being a closed ended fund, as an investor we have nothing to do in between, so they have provided only dividend payout wherein, he will book profit and give it as divided. Hopefully, we will get our investment as dividend itself during the period of 3 years.
11.                         Since, it is a closed ended fund, no SIP allowed. The lump sum can be as low as Rs. 5000 and the upper side is unlimited.
12.                         The fund is going to use the Benchmark Index of BSE500 which is a broad based index.

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