A Lumpsum Of Rs 1 Lakh Invested In ICICI Prudential Business Cycle Fund Nearly Doubles In Just 3 Yrs

ICICI Prudential Business Cycle Fund is an equity-oriented offering wherein the fund invests in companies based on different stages of an economic cycle. This concept is known as business cycle-based investing. In such a fund, the fund manager decides on the allocation to various sectors and stocks to make the most out of the opportunities arising out of that particular phase of the economic cycle.

According to Anish Tawakley, Deputy CIO – Equity and the fund manager of the Scheme, “Sector returns generally are affected by various business cycle phases. While each phase is different, an investment approach that identifies and analyses key phases in the economy could help generate a positive investment experience. ICICI Prudential Business Cycle Fund offers a distinct style by focusing on the macros. By investing, investors can gain access to appealing sectors at any particular point in time. It will further aim to achieve diversification within those sectors.”

The Fund 

ICICI Prudential Business Cycle Fund was among the earliest offering based on this theme. In its three-year track record, its fund manager, Anish Tawakley, Lalit Kumar & Manish Banthia has time and again taken several sectoral calls which has worked very well for the fund. The fund also has the flexibility to take exposure to foreign securities. 

If an investor had invested Rs. 1 lakh at the time of inception (18-Jan-2021), that investment as of January 31, 2024, would be worth to Rs 1.93 lakh, i.e. a CAGR of 24.31 per cent. A similar investment in the Scheme’s benchmark would have yielded Rs 1.73 lakh, i.e. a CAGR of 20 per cent. 

In terms of SIP, a monthly investment of Rs 10,000 since inception would amount to a total investment of Rs 3.7 lakh. As of January 31, 2024, the value of that investment would have grown to Rs 5.48, i.e. a CAGR of 26.5 per cent. A similar investment in the benchmark would have yielded a CAGR of 20.8 per cent for the same period. 

In terms of the last one-year, the fund has delivered returns to the tune of 40% as compared to its benchmark, which delivered 34 per cent. 

Fund Portfolio 

The Fund has an AUM of Rs 7,951.48 crore. Nearly 51per cent of the portfolio comprises domestic-facing sectors, as the fund looks to tap into the robust economic activity underway. Keeping with this theme, banks, autos, construction and telecom form a significant portion of the portfolio. The portfolio also has exposure to defensive sectors like Pharma & IT due to better valuations and for defensive consideration to mitigate any probable impact due to geo-political tensions, global growth slowdown, etc. The fund has an 8 per cent cash and a near 4 per cent allocation to foreign securities. (Data as of 31 January 2023).

Understanding Business Cycle

Typically, a business cycle, comprises Growth, Recession, Slump, and Recovery phases. 

Each phase influences a certain set of sectors uniquely. In the growth phase, companies chalk out expansion plans, job opportunities are plenty and consumers splurge on discretionary items. Conversely, in the slump phase, both consumers and businesses are nervous, leading to delayed spending, idle factories, cost-cutting, and layoffs.