ICICI Pru Multiple Yield Fund

WHAT IS IT:

ICICI Prudential Multiple Yield Fund Series 4 1825 Days Plan A is a close-ended hybrid debt-equity fund with a debt orientation and a five year tenure.

NFO PERIOD:

The NFO period is from May 17 to May 31 with a minimum subscription amount of Rs 5,000. Being a close-ended scheme, an investor can not buy from the mutual fund directly after the NFO closes.

SCHEME OBJECTIVE:

The primary objective of the scheme is to invest in a portfolio of debt securities.

The secondary objective is to generate long-term capital appreciation by investing a portion of the scheme's assets in equity and equity related instruments.

As per the scheme information document, on the debt side, the scheme will invest in a basket of permissible securities maturing on or before maturity with a view to hold them till maturity. The equity portion is aimed at attempting to give a boost to returns, although in theory and reality, it can also eat away into the returns investments.

ASSET ALLOCATION:

Indicative allocations are 6595 per cent in domestic debt securities including government securities, 0-30 per cent in money market instruments and cash and 5-35 per cent in equity or equity related securities.

 Since it is a five-year close ended hybrid product, with exit option on stock exchange only, which is as good as absent since there is zero liquidity in all exchange-listed close-ended mutual fund schemes, investors have to think twice before investing. Equity investment up to 35 per cent makes it attractive and risky at the same time, as the NAV will factor in advantages and disadvantages of both debt and equity. But it helps to remember that equity returns can be negative as well. Being a hybrid FMP with an equity exposure, there is an added uncertainty on how the fund manager will live up to the challenge of wild fluctuations in equities over a prolonged period.

An analysis of returns from Capitaline NAV database based on May 22 NAVs of un-expired hybrid close ended FMPs with a tenure of three years or more reveals seven schemes to have given a two-year CAGR of 7.13 per cent, while six comparable open-end monthly income plan schemes having equity exposure of over 20 per cent gave a higher two-year CAGR of 9.16 per cent.