Consistent dividend track record

ICICI Prudential MIP 25 Fund is a debt-oriented hybrid fund that primarily invests in debt instruments, with a maximum allowable exposure in equity of up to 30 per cent of the total net assets. The fund was launched in March 2004 and has average assets of Rs 750 crore under management for the quarter ended September.

The fund, managed by Avnish Jain (debt) and Mrinal Singh (Equity), has ranked in the top 30 percentile (Crisil fund rank two) of the monthly income plan (MIP)-aggressive category in the Crisil mutual fund ranking over the last six quarters. The consistency in ranking indicates a blend of consistent performance and disciplined portfolio management.

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INVESTMENT PHILOSOPHY
The fund seeks to generate regular income through dividends, along with capital appreciation through a minority investment in equity. At the same time, investors must note that regular dividends are not assured and it is subject to the availability of distributable surplus.

Crisil classifies MIP funds as aggressive and conservative, based on equity allocation. A higher allocation to equity (15-30 per cent) is classified as aggressive, and a lower allocation (up to 15 per cent) as conservative. Within the stated allocation, a fund manager may alter a portfolio's exposure based on the prevailing market scenario. ICICI Prudential MIP 25 Fund has been categorised as 'MIP Aggressive'.

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PERFORMANCE
The fund has outperformed its benchmark (Crisil MIPEX) and peers across time frames, viz., six months, one year and three years. Over a three-year period, the fund has delivered annualised returns of over 14 per cent, as against a category average of 10.80 per cent for the same period and 10.48 per cent by the benchmark.

Further, an investment of Rs 1,000 in the fund since April 2, 2004 would have grown to Rs 2,000 till date.

The same amount invested in a peer group would have returned Rs 1,843, and in the benchmark Rs 1,644.

ACTIVE MANAGEMENT
The fund manager has actively managed the portfolio over the last five years. As compared to peers, the fund has been more aggressive in increasing its duration when interest rates had fallen, and decreasing the maturity of its papers when these rose. As a rule of thumb, when long-term yields fall, the prices of bond securities rise, and bond-portfolio managers increase the maturity of portfolio. The reverse is also true. The exposure in equity and equity-related instruments over the last three years averaged 24 per cent and has varied between 18 and 30 per cent.

The manager has actively managed the equity component in response to the markets, based on attractiveness of valuations. Over the last five years, the fund has increased its exposure during down-market cycles and decreased it during up-market.

REGULAR DIVIDENDS
Barring October and November in 2008 during the global credit crisis, the fund has paid dividends in 46 out of 48 months.

Thus, it has been consistent in terms of dividend pay-outs. The average monthly dividend yield was 0.5 per cent over the same period.

ASSET QUALITY
Majority of the portfolio is invested in the highest-rated debt papers. During the last three years, 81 per cent of the debt portfolio on an average was invested in the highest-rated debt securities i.e. sovereign, AAA/P1+ and equivalent.