• Maheswaran Hariharan

AssetPlus NFO Review: ICICI Prudential Housing Opportunities Fund

Updated: Oct 26

ICICI Prudential AMC is launching an NFO, which is set to open for subscription from March 28th, 2022 and closes on April 11th, 2022.


Investment Objective: To generate wealth over the long term, suitable for investors having a high to very high risk appetite, who are comfortable with volatility for prolonged periods.


Investment Strategy: As the name suggests, the fund will invest in equity and equity oriented instruments of companies engaged in and/or expected to benefit from the boom in Housing Theme. The fund follows an approach which emphasizes on the various opportunities present in the housing theme and aims to construct a portfolio of stocks which is expected to participate in this growing theme.


Fund Manager: Sankaran Naren and Anand Sharma

Benchmark: Nifty Housing TRI

Minimum Lumpsum Investment Amount: Rs 5,000

Minimum SIP Investment Amount: Rs 100


Fund Management Process:

  1. The Fund follows an active management with the expectation to generate alpha over the long term by investing in a thematic approach.

  2. Investment universe is majorly from the following sectors:

  • Banks and Financial Services

  • Consumer Goods

  • Cement

  • Paints

  • Power

  • Metals

  • Oil and Gas

3. Portfolio will involve periodic rebalancing with changes in the composition of the fund based on market opportunities.


Opportunity:

Housing and its allied activities has faced a lull since 2013 in India and returns from investments has been subpar and below expectations, with further damage caused by the onset of Covid-19. But a reversal of fortune is very well on the cards.


Trends in Housing Price Index and Land/Building Prices. Source: ICICI Prudential AMC


There are multiple factors aiding the possible boom in Housing Theme:

  1. Population Growth - India is expected to overtake China as the world's most populous in a decade and the population growth is set to be stable till 2050.

  2. Demography - The absolute growing population with a young median age translates into larger workforce with greater income generation opportunities.

  3. Urbanization - Last decade has shown that India's urban population has grown by 3.4x the growth rate of rural population along with increased migration levels due to better access to education and jobs.

  4. Interest Rate - Interest rates are currently at a low for Home loans. Financing has also become easily accessible with strong banks and NBFCs.

  5. Government Policies - Union and State Governments have been trying to stimulate activity in this space through supportive measures, especially with the Union Budget focusing heavily on Capex, affordable housing and FDI.

Based on our analysis, we have observed the following pros and cons:

Pros:

  1. Experienced fund manager having a solid proven track record in the equity space

  2. Exposure to all themes of Housing and its allied activities

  3. Ability to specialize and capture a specific theme

  4. Not limited to any particular style of investing

Cons:

  1. Lack of flexibility to eliminate concentration risk

  2. Chances of long periods of underperformance

  3. Lack of diversification across broader themes as it is restricted to housing

This fund is a relatively very new concept in the Indian Mutual Fund space, opening doors to probable higher returns by focusing strongly in the growth of Housing theme, but at the same time, coming with a greater amount of risk as it is largely mandated within the theme. Investors with very high risk appetite can allocate small amounts to develop their satellite portfolio, which is meant for higher returns at a high risk.


It is of utmost importance that the fund should be discussed with your financial advisor and then ascertain whether it is suitable to invest. Always read the scheme documents fully before investing.

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