ICICI Prudential Launches Passive Multi-Asset Fund of Funds [NFO]

ICICI Pru Passive Multi Asset Fund of Fund - NFO - ReviewICICI Prudential Launches Passive Multi-Asset Fund of Funds [NFO]

Equity is high risk-high return game. Debt gives low returns, but these are stable. Returns from gold fluctuates and not stable. Investments in global equity performs well in medium to long term. ICICI Prudential has launched a passive multi asset fund that invests in all these investment options. ICICI Prudential Passive Multi Asset Fund opens for subscription on 27 December, 2021.  Multi asset mutual funds generally invest in investment classes like equity, debt and gold. This ICICI Pru Passive Multi Asset Fund invests in overseas investments too. Should you invest in ICICI Prudential Passive Multi-Asset Fund of Funds NFO? What are the various risk factors associated with such funds?

Also Read: How to invest in G-Secs through RBI Retail Direct Platform?

ICICI Prudential Passive Multi-Asset FoF – NFO issue details

Here are the NFO issue details.

Scheme Opens 27-Dec-21
Scheme Closes 10-Jan-22
Scheme reopens for continuous purchase / sale Within 5 business days
Minimum Lumpsum Rs 1,000
Minimum SIP Rs 100 for 6 months
NAV of the fund Rs 10 during NFO period
Entry Load Nil
Exit Load 1% if reedeemed within 1 year
Risk Very High Risk
Benchmark CRISIL Hybrid 50+50- Moderate Index (80% weightage) + S&P Global 1200 Index (15% weightage) + Domestic Gold Price (5% weightage)
Fund Manager Mr. Sankaran Naren
Max TER 1.00%

ICICI Prudential Passive Multi-Asset Fund of Funds SID

What is the investment objective of this MF scheme?

ICICI Prudential Passive Multi-Asset Fund of Funds is a Fund of Fund scheme with the primary objective to generate returns by predominantly investing in passively managed funds launched in India and/or overseas.

There is no assurance or guarantee that the investment objective of the scheme will be realized.

What is the allocation pattern in this mutual fund?

This fund investment pattern is as follows:

Type of instruments Min % Max % Risk Profile
Units of mutual fund schemes as
stated below:
95% 100% High
A) Domestic Equity ETFs/Index Funds 25% 65% High
B) Domestic Debt ETFs/Index Funds 25% 65% Low to Medium
C) ETFs/Index Funds investing in
Overseas securities
10% 30% Medium to High
D) Domestic Gold ETFs 0% 15% Medium to High
Reverse Repo, Tri-Party Repo, Units of Debt oriented mutual fund schemes 0% 5% Low to Medium

How these asset classes performed year on year in the last 10 years?

The below chart depicts which asset class out-performed year on year in the last 10 years.

ICICI Pru Passive Multi Asset Fund of Fund - Performance of various asset classes year on year in last 10 years

Why to invest in ICICI Prudential Passive Multi-Asset Fund of Funds?

Here are a few reasons to invest in such mutual fund schemes.

1) This fund would invest in all 3 assets classes, i.e. Equity (domestic and overseas), debt and gold. Asset classes would follow different cycles over different periods, hence investing in such a combination would help to get optimal returns.

2) This fund invests in multi assets i.e. Equity, debt and gold. Domestic equity aims to generate capital appreciation through the India growth story. Debt aims to generate stable returns in the medium to long term. Gold can act as a potential hedge against inflation. Global equity can help in providing diversification benefits and help to invest in mega trends. Such diversified portfolio can help to get high returns in the medium to long term.

3) The portfolio has an innovative range of global exchange traded funds (ETFs).

4) This portfolio aims to generate better risk adjusted returns.

Risk Factors in ICICI Prudential Passive Multi-Asset Fund of Funds

One should consider some of these risk factors / negative factors before investing.

1) If an investor wants to invest separately in such asset classes, they can pick-up right equity mutual funds or debt mutual funds or gold investment options or international funds. In case of multi asset fund, the investor has to depend on just one fund and cannot pick-up any quality funds from various asset class categories.

2) These funds are taxed as debt funds if their equity allocations do not meet the 65% limit, with STCG being taxed at the investor tax slab rate and LTCG being taxed at 20% with benefits of indexation.

3) This fund invests in ETFs where there could be tracking error risk.

4) Since it invests in debt funds, these would have interest rate risks, default risks and reinvestment risks.

5) It would invest in global equity where there is geopolitical risks and currency risk.

6) You can refer complete risk factors of investing in this particular scheme in SID / KIM / NFO prospectus.

Performance of existing Multi Asset Funds in India

Now, let us look at some of the best performing Multi Asset Funds in India. These top multi asset funds gave 9.8% to 18.6% annualized returns in the last 5 years. Returns above 1 year are annualized.

Scheme Name  1 Year 3 Yrs 5 Yrs
Quant Multi Asset Fund 57.4% 30.2% 18.6%
Axis Triple Advantage Fund 26.2% 20.2% 16.0%
ICICI Prudential Multi-Asset Fund 34.5% 18.0% 15.7%
HDFC Multi-Asset Fund 21.0% 17.3% 12.2%
Navi 3 in 1 Fund 23.6% 15.5% 12.0%
SBI Multi Asset Allocation Fund 14.8% 13.8% 10.8%
UTI Multi Asset Fund 13.2% 10.3% 9.8%

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ICICI Prudential Passive Multi-Asset Fund of Funds – Should you subscribe?

ICICI Prudential already have multi asset fund, however modifying the investment objective (to align to the new fund strategy), could be little challenging, hence they would have come up with another multi asset fund to invest overseas equities too.

ICICI Prudential Passive Multi-Asset Fund of Funds invests in multi asset class, i.e. equity (domestic and overseas), debt and gold. As indicated earlier, while I am not against such multi asset funds, such funds would provide minimum scope for investors to play with equity or debt or gold individually. Instead, one can pick individual mutual funds from such asset classes and if they are not happy, they can always exit and invest in better quality funds from such asset classes.  If you still want to proceed with such investment strategy and test with new funds, you can consider this fund. Alternatively, you can pick-up some of the top performing multi asset funds indicated above.

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Suresh KP

9 comments

  • Vandhiadevan Varadharajan

    If we choose separate fund from each asset class like Equity,Debt,International and Gold to make a complete portfolio, then rebalancing cost us Right ?
    These type of fund will avoid rebalancing cost to us and one stop solution for goal based investment but again, whether allocation is dynamic or static ?

    • Yes, but that cost is anyway baked into even new fund right. e.g. you invest 1lakh each in different asset classes funds (equity, debt and gold) and they charge 1%. Means you are paying Rs 1,000 each totalling to Rs 3,000 on 3 Lakh. Now you invest this 3 lakhs such single fund which also charges 1% which is 3,000. Net, no cost benefit.

  • Arpan Thukral

    Sir, could you suggest some low risk funds where I can park funds from some recently matured FDs. Since FDRs are generating very low returns, I am looking to diversify some of the funds from their to low risk debt funds. Please suggest if this is the correct approach. If yes, what portion of funds should ideally be reallocated to such funds. Also, would these fund of funds also be a good option.
    I have some other investments in equity mutual funds via SIP as well. I am 33 years old currently.

    • Arpan Thukral

      I have already reviewed your article on debt funds to invest in 2020, and since it is dated, I thought of asking the question again. I also wish to diversify between short term, medium term and long term.

    • Hello Arpan, Debt funds have been generating low returns too. If you observe last 1 years, these funds generated merely 3% to 6% returns. This situation might continue for few more quarters. If you are looking for low risk debt funds, you can consider HDFC Ultra Short Term Fund / ICICI Ultra short term fund for short term.

      • Arpan Thukral

        Could you guide me as to what is the right time to exit from these. As in how to determine the “ultra short” tenure?

        • These funds are good for 6 months to 1 year tenure. Since these are not linked to equity, you can continue to invest and take out as and when you need money.

          • Arpan Thukral

            Can you answer 1 more query. How is investing in an NFO different from investing in the same fund at a later date – both lumpsum and via SIP?

          • NFO is new fund. No performance history. It is like testing. However for existing funds, there is performance history. While past history should not be considered, one can atleast assess how well it manages in various market cycles.

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