5 factors that helped ICICI Pru Flexicap Fund NFO collect about Rs 10,000 crore
ICICI Prudential Flexicap Fund got around Rs 10,000 crore, the highest amount raised by any active equity fund in the history of mutual funds
The NFO saw participation from 4 lakh retail investors and 15,000 distribution partners.
The previous record for highest-ever collection by open-ended equity fund was held by Reliance Natural Resources Fund, which had collected around Rs 5,660 crore.
Let us look at the 5 key factors that drove ICICI Pru MF’s mammoth fund-raising.
1. Flexicap freedom
ICICI Pru Flexicap has a market cap allocation plan of 50-100 per cent for large-caps and 0-50 per cent for mid- and small-caps. But as per its model, the fund may start with 75-80 per cent in large-caps and the rest in mid- and small-caps. From a risk-reward perspective, flexicap funds fall in the middle of the diversified space (moderate) compared to multicap funds. Flexicap funds offer low potential risks relative to investing more in mid- and small-caps. The new flexicap fund offers higher large-cap exposure i.e. more perceived safety at all times.
2. Distribution muscle
ICICI Prudential MF has ICICI Bank has its sponsor, the other one being Prudential. ICICI Bank has arguably one of the most potential distribution platforms in the country. For this NFO alone, 15,000 distributors actively helped. ICICI Bank has over 5,000 branches. That apart, ICICI Pru MF has an investor base of over 7 million. All this mean that selling the NFO through these platforms can bring big results and that has showed up in this NFO case.
3. Switches from existing ICICI Pru funds
Another factor that may have played a big role in the ICICI Pru Flexicap collection are the switches from ICICI Pru MF funds. NFOs usually allow existing investors to switch money between schemes. This may have happened in this case. For the AMC, this ensures two things. One, the NFO gets more money. Two, the assets under management stays in the same AMC instead of going out in the case of redemptions. Given the freedom in the flexicap model, it would have been easier to convince new and existing investors to pump money in the NFO. Typically, thematic NFOs are riskier. But a flexicap structure is much more safe.
The scheme is being managed by Senior Fund Manager Rajat Chandak and overseas investments will be managed by Fund Manager Priyanka Khandelwal. ICICI Prudential Mutual Fund has one of India’s largest and experienced investment and research team led by S Naren, who is well known for his calls on macros and market cycles. While Naren has beeen around for a long time, in terms of his investment calls he has been a legend of sorts. He called the 2008-09 crash correctly. Over the last 2 decades, the fund-house by the dint of its reputation has garnered Rs 4.3 lakh crore across nearly 70 schemes. So, this would have given an additional comfort to Flexicap fund new investor.
Indian markets have been performing well. Valuations are no longer cheap. However, stock markets have not corrected despite what naysayers have said. When the Sensex crossed 50,000, people expected markets to crash. That didn’t happen. Covid, slowdown, Fed rate hike, oil prices…almost everything has been hurled at the bulls but markets have stayed their course. Today, the Sensex is pushing 53,000. Hence, Fear Of Missing Out – FOMO – is extremely high. FOMO has played out many times. Yet, many investors have tried to remain sidelines. Thus, when a fund-house with a good vintage comes with a reasonably sound investment strategy in a flexicap fund structure, it is natural that investors suffering from FOMO will try to go all out.