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Investors looking for a relatively safer fund for the long term can buy units of ICICI Prudential Child Care – Study plan. It invests at least 75 per cent of its portfolio in debt instruments which provides the safety while an equity component of up to 25 per cent gives returns a boost. Some risk appetite is required, however, since the equity portion comprises mid-cap stocks too.
Across one, three and five-year timeframes, the fund ranks in the top quartile of the debt-oriented balanced fund category.
It has done better than its category by 6-11 percentage points across timeframes.
Since the fund is targeted towards providing for children’s education, exit loads are steep, at 3, 2 and 1 per cent for exits before one, two and three years, respectively. Investments made in minors’ names are locked in for three years or till the minor turns 18, whichever is earlier.
Juggling debt
The debt portion of the portfolio has been maintained at 76-79 per cent over the years, save brief periods, as in late 2008 when the debt component went over 90 per cent.
Over the past five years, the fund has markedly changed its debt strategy owing to the gyrations in the debt market.
From an average maturity of less than 1.5 years for the most part, the fund moved into long-term debt from late 2013.
The longer maturity profile was thanks to heavy investments in government securities, which began turning attractive as yields started to rise. G-Secs haven’t formed a part of the fund’s portfolio since 2009.
From October 2013, G-Secs have accounted for over 40 per cent of the portfolio. With interest rates starting to decline, locking into longer-term debt may also pay off.
The fund also lowered its credit risk by sticking to top-rated AAA corporate debt from 2013 onwards. Lower-rated AA debt from institutions such as SREI Infrastructure Finance and Shriram Transport Finance had earlier formed a good chunk of the fund’s portfolio, accounting for 40-60 per cent of the debt portion between 2010 and 2012.
The yield to maturity of the fund’s April portfolio is healthy at 8.14 per cent and slightly better than HDFC Children’s Gift Fund – Savings, a gap it has managed over the past couple of years. But on the equity side, the fund has taken more risks.
Mid-cap and small-cap stocks have formed the majority of the equity holdings for years now; stock choices are also diverse and frequently offbeat.
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