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Let's make this a 25,000 cr fund!Amar Shah, ICICI Prudential MF, Mumbai

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I Pru re-positioned its Equity Savings Fund back in Mar-21,in an environment where debt was yielding very low carry, equity valuationswere looking expensive and debt funds were struggling to beat aggressivelypriced bank savings accounts.

With net equity exposure of around 15% in a handful ofbluechips, covered calls that brought in steady income, arbitrage and debtallocations, the fund was positioned to deliver a healthy debt-like outcomewith equity taxation, with a lower TER commensurate with debt returns. The fundgrew in just 6 months from Mar to Sep 21 from 1000 to 5000 cr AuM.

After the tax changes for debt funds, I Pru’s ESF saw minortweaks but the positioning is now dual: it serves as a great parking vehiclefor STPs and also serves as a tax efficient conservative solution for long terminvestors.

It is unfortunate that many retail MFDs migrated from theindustry’s debt funds to company FDs in recent years. Well managed debt fundshave consistently delivered competitive returns over 3 year rolling cycles.Today, with prospects of an interest rate downcycle, capital gains from debtfunds can sweeten returns which traditional products cannot match. For I Pru,it is not a question of ESF vs debt funds – both have well defined spaces ininvestor portfolios.

If you want to position yourself for an interest cut cycle,consider I Pru’s All Seasons Bond Fund and if you have the risk appetite, lookat long duration funds. If you want inflation fighting returns with lowvolatility, ESF may outperform conservative hybrids on a post tax basis.

I Pru’s ESF, with its sharp dual positioning – (1) sourcefund for STPs and (2) ideal conservative fund for mass-affluent/HNI investorsin higher tax brackets – and track record of delivering smoother outcomes indifferent market cycles, has the potential to scale up quickly to 25,000 crs. IPru is engaging extensively with all distributors to drive this proposition andseeks their active participation in helping deliver happy outcomes to investorsthrough its ESF.

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Mohsin Bijepuri ARN NO :33913 Chennai , 26 May 2023

It’s always a pleasure to listen to the most knowledgeable & enthusiastic Amar Shah. Storehouse of insights. ICICI ESF will cross 25,000 Crores.

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