Have you ever heard of someone who is 6 feet tall drowning in a river with an average depth of 5 feet?
Your answer might be a ‘No’. But here we are talking about average depth of the river. The depth of the river maybe maximum 9 feet and minimum 3 feet or 2 feet but the average depth is 5 feet, so, a man with a height of 6 feet can drown in a river with average depth of 5 feet. Thus the term “average” may be misleading, as it can mask the true picture or the variance from the average.
Let us understand and learn about a new fund from ICICI with minimum variance which aims to reduce the variance from the average:
ICICI Prudential Mutual Fund has launched an open-ended equity scheme/fund named as ‘ICICI Prudential Equity Minimum Variance Fund’. The scheme follows the ‘Minimum Variance Theme’. The primary goal of the scheme is to generate long term capital appreciation by investing in equity and equity related instruments through a diversified basket which aims to minimize the portfolio volatility. It emphasizes stocks in the large – cap category with low volatility by assigning them a higher weightage.
In this article, we will dive in to know more about NFO of ICICI Prudential Equity Minimum Variance Fund.
ABOUT THE FUND
Equity Oriented Scheme
Objective to provide Long-term Capital Appreciation
Aims for lower volatility in the fund vis-à-vis the benchmark
Risk adjusted returns focused scheme rather than being only return focused
Diversified portfolio spread across companies from NIFTY 50 Index
ABOUT THE UNIVERSE:
While low variance as an investment approach can give better risk adjusted returns, ICICI Pru Equity Minimum Variance Fund prefer low volatility in NIFTY 50 Index due to the following reasons:
| REMARKS | |
| Large Caps | Low Volatility |
| Governance + Liquidity | High |
| Current Valuations | Reasonable |
| Performance | Good but lagging compared to other market caps |
INVESTMENT STRATEGY OF THIS NFO:
The objective of this scheme is: Portfolio Var < NIFTY 50 Var
1. NIFTY 50 Universe: Large- cap stocks as the universe.
2. Variance Filter: Stocks with low volatility are assigned higher weightage and vice versa.
3. Fundamental Selection: Deep down study on the companies in the universe
4. Active Management: Weight management and view based allocation
5. Portfolio Construction: Objective to construct a diversified portfolio with lower volatility.
IDEAL FOR INVESTORS:
The ICICI Prudential Equity Minimum Variance Fund is ideal for below type of investors:
Those investors who are looking for long-term capital appreciation.
Those investors who are looking for equity investments, but worried about high market volatility.
Those investors who are looking to invest in large-cap companies having good corporate governance and high cash-flow.
HOW DOES LOW VARIANCE APPROACH HELP?
Variance is a measurement of the degree of risk in an investment. Stocks with low variance are typically considered less risky and offer lower potential returns. Meanwhile, stocks with higher variance tend to attract more aggressive investors who are willing to take more risk in exchange of higher returns. Low variance stocks are better suited for conservative investors who prefer stability and have a lower risk-taking ability.
The opening date of this NFO is 18th November 2024 and the closing date will be 2nd December 2024.
CONCLUSION:
From the above-mentioned details, we can conclude that ICICI Prudential Equity Minimum Variance Fund is suitable for people with low risk-taking ability and who want long-term capital appreciation. We, at RichVik, are recommending funds with this principle because the markets are expected to remain range bound (when the market price fluctuates within a fixed range) for the next 2 to 4 quarters.
To understand more on the topic as well as to start investments please feel free to contact us:
Phone: +91-9324609115
E-mail: team@richvikwealth.in