ICICI Prudential Services Industries Fund

Services industries sector covers wide gamut of activities such as trade, banking and finance, infotainment, telecommunication, railways and technical services among others. At present, the service sector constitutes a dominant proportion of our nation's economy. Post liberalisation, companies within the Services sector have so far displayed robust growth which not only led to service industries be a dominant contributor to the economy but has also encouraged many fund houses to offer this theme for investment.

ICICI Prudential Services Industries Fund (IPSIF) is one such open-ended equity fund from the stable of ICICI Mutual Fund. IPSIF predominantly invests in equity and equity related securities of companies belonging to the services industries, along with debt and money market instruments to provide the stability to the portfolio and to manage its liquidity requirements. Launched in November 2005, the fund has been in existence for over 5 years now.

The primary investment objective of the scheme is "to provide capital appreciation and income distribution to unit holders by investing predominantly in equity/equity related securities of the companies belonging to the service industries and the balance in debt securities and money market instruments. However, there can be no assurance that the investment objective of the Scheme will be realized".

IPSIF follows a mandate of investing 70% - 100% of its assets in companies in the "services sector" domain, and upto 30% of its assets in debt and money market instruments.

Over the past one year, the fund has held a major portion (i.e. 45% - 69%) of its portfolio in large cap stocks, and in the mid and small cap space 26% – 47% of its assets. In debt and cash, the fund's exposure in the last one year has been upto 10% of its total assets.

IPSIF selects stocks from the universe of below listed industries

• Auto Components
• Aviation
• Banking and Financial Services
• Garment Accessories
• Communications
• Construction
• Consultancy
• Education & Training
• Healthcare
• Hospitality
• IT & IT Enabled Services
• Logistics & Distribution
• Media and Entertainment
• Power Generation, Transmission & Equipment
• Telecom
• Tourism
• Trade and Retail
• Transportation & Shipping

Equity Portfolio

IPSIF is benchmarked to the CNX Service Sector Index. Its latest portfolio (i.e. as on September 30, 2011) constitutes of 32 stocks, where the top-10 stocks account for 52.9% of the portfolio while the top-5 sectors account for 66.9% of its portfolio. The fund manager doesn't churn the portfolio very aggressively as revealed by the portfolio turnover ratio of 0.82 times.

How IPSIF has fared vis-à-vis its peers

The table above reveals that IPSIF's performance vis-à-vis its peer is quite competitive. On 3-Yr return the fund has fared almost in sync with its benchmark (CNX Service Sector index). However, over 5–Yr time frame it has underperformed its benchmark by a noticeable margin, by clocking returns of mere 4.3% CAGR, as against the 7% CAGR returns generated by CNX Service Sector.

Fund Manager Profile

Even though the returns delivered by ICICI Prudential Services Industries Fund are competing within the category, they are nothing to vie for when seen on a risk adjusted basis. Moreover, since the fund focuses on investing in companies in the "service sector" domain, its fortune would be closely linked to the theme, which makes it a risky investment proposition for one's investment portfolio.

An opportunities fund instead, can help you invest in sectors that have the potential to generate stellar returns. Although they too are not risk free investments; they are better placed than the thematic and sectorial funds in managing risk. In today's dynamic world, attractiveness of a particular sector can change rapidly as happened post 2008 crisis. In such times a thematic fund would be forced to stick to the same sectors referred in the mandate. On the other hand Opportunities funds would be nimble enough to change the guard. Which category of funds would you now like to invest in to benefit from the broader economic and industry trends?

In depth analysis of the schemes can help you identify potential winners in the each category of mutual funds. However, investing even in the best performing sectoral or a thematic fund wouldn't be a wise decision as you might be investing at the time when the underlying sector or a fund might be at its peak.