Should you invest in ICICI Prudential Multi Asset Fund?

The FoF envisages allocation of 25-65% for domestic equities, 25-65% for debt, 0-15% for gold and 10-30% for international equities. All these exposures will be taken through ETFs.

While the underlying ETFs are passive in nature, the selection and asset allocation of ETFs will be done actively by the fund managers of the scheme.

However, the expense ratio of the FOF including the underlying ETF will be capped at 1% for the regular plan. According to a person with knowledge of the matter, who declined to be named, the direct scheme is likely to see an expense ratio of around 0.40%. The New Fund Offer (NFO) for FoF opened on 27th December and will close on 10th January 2022.

According to Sankaran Naren, Chief Investment Officer (CIO), ICICI Prudential Asset Management Company, “FOF will allocate between equity and debt and will largely refer to the in-house equity and debt valuation model of ICICI MF.”

The in-house model is reflected in ICICI Prudential Balanced Advantage, which has an unhedged equity level of around 37% at end-November, as per value research and data provided by ICICI Prudential All Seasons Bond Fund (for the loan tenure).

The FoF will also be guided by AMC’s in-house market-cap model, which is used by AMC’s Flexicap Fund. At present the scheme is 80% in large cap, 15% in mid cap and 5% in small cap.

As per the product presentation, FoF will be allowed to invest in a large universe of ETFs, which includes ETFs from other fund houses, both domestic and global. ETFs in their universe include both plain vanilla tracking Nifty 50 and Sensex as well as factor driven ones like low volume or sector specific ones like FMCG. On the debt side, given the lack of a strong suit with ICICI Prudential, the FoF may look at more established products such as the Bharat Bond series managed by Edelweiss AMC.

Internationally, the product basket includes ETFs managed by BlackRock (the iShares series), Invesco and VanEck. These track markets such as the US, China, Russia and Japan as well as thematic ETFs such as Dividend Aristocrats or Gold Miners.

The ICICI Prudential AMC presentation outlines four key reasons why you should invest. Firstly, the fund house has access to the best quality research and expertise on various markets and secondly, it can provide them with the right weighting. Third, when an investor invests directly and rebalances between asset classes, they may pay tax on every redemption. Fourth, emotions prevent investors from making rational decisions and rebalancing when extreme events occur. Financial experts have expressed some skepticism.

“Persons who have distributors or financial advisors can get their assets allotted through these middlemen. It will be more in line with their financial goals and time frame. “I don’t think they need an asset allocator fund, be it active or passive,” said Kalpesh Ashar, founder, Full Circle Financial Planners & Advisors. “The loan taxation of this product is a negative in contrast to BAF,” said Munish Randev, founder of Servin Family Office.

However, for a growing set of do-it-yourself or DIY investors in India, the fund has the potential to become a long-term ‘all-weather’ product.

Since it is open-ended, such investors can wait for the fund to establish a track record and more clearly state their portfolio before taking the call.