ICICI Prudential’s popular Thematic Advantage Fund (FoF) is being repositioned as an aggressive hybrid active FoF to comply with SEBI’s categorization guidelines.
This will mean around 20-25% allocation to debt while the remaining 75-80% will be managed exactly how TAF has been managed – as a FoF that moves nimbly across themes and sectors with bold high conviction calls.
Chintan says that while TAF has always had 5-15% allocation to debt and cash, in its new avatar, maintaining a minimum 20% will bring in incremental stability.
The fund’s largest position is the AMC’s IT sector fund at a hefty 22% of portfolio. Chintan says that while the fund bore the brunt of the AI fears led sell-off in recent months, the IT sector’s more recent outperformance over market and a contra buy call on the sector reinforce their stance to keep this fund at a significant weight in the FoF.
Banking and energy sectors occupy 2nd and 3rdpositions with meaty allocations of 19% and 18% respectively. While banking seems to be a market consensus buy call, the large position in their energy opportunities fund signifies bullishness on the power ecosystem as well as the opportunities that the Gulf crisis has thrown up for oil and gas players.
Chintan says these two sectors rank right on top of the fund house’s sector picks list right now.
Industrials / capital goods / infrastructure is a notable absence in the fund’s portfolio right now. Chintan says that the FoF always looks at absolute plus relative attractiveness of any sector or theme at any point of time. Once relative attractiveness of these themes come into play, don’t be surprised to see sizeable changes in the portfolio.
Chintan adds that when investing contra, while the plus is very good entry points with high margin of safety, the minus is that in the near term, that theme/sector may continue underperforming – after all that’s what makes it a contra bet at the time of buying.
Given the fund house’s strong track record of prescient sector and theme calls, the ICICI Prudential Aggressive Hybrid Active FoF (erstwhile TAF) remains an investor’s best way of capturing the AMC’s timely calls in a single solution.