ICICI Pru Large & Mid Cap Fund: Excelling with Prudent Risk Management Strategies

ICICI Pru Large & Mid Cap Fund is a high conviction-driven Large & Mid Cap Fund that has shown impressive growth in recent years and has outperformed many of its peers. With a focus on smart stock & sector selection strategy, the fund has proven its ability to generate excellent risk-adjusted returns over the long term.

Launched in July 1998, ICICI Pru Large & Mid Cap Fund was originally known as ICICI Pru Large Cap Fund before being recategorised and renamed in 2018. Initially, the fund invested over 65% of its assets in large caps, with some tactical allocation to mid and small-cap stocks. The fund is now mandated to invest at least 35% of its assets each in large-cap and mid-cap stocks. Accordingly, the past performance of the fund (until 2018) is not directly comparable. However, under its current mandate, the fund has performed well in recent years. ICICI Pru Large & Mid Cap Fund's substantial investment in mid-cap stocks has helped it benefit from the broad-based market rally in recent years. Additionally, its focus on fundamentally sound value-oriented stocks across high-potential sectors has resulted in superior risk-adjusted returns for its investors.

Despite witnessing bouts of short-term underperformance, ICICI Pru Large & Mid Cap Fund has generated returns at a CAGR of about 19% since inception. With the recent track record of robust returns, the fund now stands among the top performers in the category and is ahead of the benchmark index across time frames. In recent years, ICICI Pru Large & Mid Cap Fund has gained popularity among investors, amassing a corpus of Rs 13,420 crore as of May 31, 2024, making it one of the largest schemes in the Large & Mid Cap Fund category. Notably, its corpus has nearly tripled in the last two years.

In the last 5 years, ICICI Pru Large & Mid Cap Fund has recorded growth at a CAGR of 23.8%, higher than the growth of 22.6% in the benchmark Nifty LargeMidcap 250 - TRI index. An investment of Rs 10,000 in the fund five years ago would now be worth Rs 29,071, whereas a simultaneous investment in the benchmark would have now appreciated to Rs 27,763.

In recent years, ICICI Pru Large & Mid Cap Fund has shown exemplary growth boosting its overall performance. Until the year 2020, the fund struggled to keep pace with the benchmark and many of its peers and trailed them by a significant margin. However, the fund showed a turnaround in performance from 2021 onwards, outpacing the benchmark by a strong margin and topping the category returns.

On a rolling returns basis, in the last 2-year and 3-year periods, ICICI Pru Large & Mid Cap Fund has outperformed the benchmark and the category average by around 4-5 percentage points in CAGR. The noteworthy performance in recent years has helped improve its returns across time frames. Over the longer 5-year and 7-year period, ICICI Pru Large & Mid Cap Fund has maintained a decent lead over many of its peers and stands strong compared to the benchmark.

The volatility registered by the fund (13.81%) is lower than the category average (14.45%) as well as the benchmark (14.68%), while its Sharpe ratio stands out when compared to the benchmark and is currently the best in the category.

What is the investment strategy of ICICI Pru Large & Mid Cap Fund?

ICICI Pru Large & Mid Cap Fund predominantly invests in equity and equity-related instruments of large-cap and mid-cap companies, investing a minimum of 35% in each segment. The fund is sector agnostic and adopts a counter-cyclical approach to investing by remaining underweight in those sectors to which the larger market holds an elevated exposure.

ICICI Pru Large & Mid Cap Fund follows a 'top-down' approach to take active sectorial calls and blends it with the 'bottom-up' approach to select stocks within those sectors. The fund aims to invest in a diverse range of industries/sectors to mitigate the various risks. While picking stocks, the fund focuses on the fundamentals of the business, the industry structure, the quality of management, sensitivity to economic factors, the financial strength of the company, and the key earnings drivers. The fund also invests some portion in Derivatives for hedging purpose.

ICICI Pru Large & Mid Cap Fund usually invests in around 80-90 stocks at any given point. As of May 31, 2024, the fund held 90 stocks in its portfolio with the top 10 stocks accounting for nearly one-third of its assets. Its top holdings comprise mainly large-cap names such as ICICI Bank, HDFC Bank Maruti Suzuki India, SBI Cards and Payment Services, and NTPC, followed by some mid-cap names such as Hindustan Petroleum, Alkem Laboratories, and Bharat Forge. Many of these stocks have been part of the fund's portfolio for over 2 years now. The fund's portfolio turnover has ranged between 40-60% in the last one year, signifying occasional churning of a portion of the portfolio.

In the last two years, TVS Motor Company, Bharti Airtel, and SBI were the major contributors to the fund's gains. ICICI Bank, L&T, The Federal Bank, Cummins India, ONGC, Bharat Forge, and NTPC are among other stocks that boosted the fund's performance over the last couple of years. Meanwhile, the fund booked profit in Indiamart Intermesh, SAIL, Sansera Engineering, 360 One Wam, Siemens, Schaeffler India, JSW Infrastructure, Aditya Birla Sunlife AMC, GlaxoSmithKline Pharma, LIC of India, among others.

ICICI Pru Large & Mid Cap Fund holds well-balanced exposure across cyclical, defensive, and sensitive sectors. Its portfolio is diversified across 30 sectors with a notable inclination towards Banking & Finance, comprising 26.2% of its total assets. The fund also holds substantial exposure towards Pharma, Auto, Engineering, Petroleum, and Consumption. Additionally, Infotech, Power, Oil & Gas, Chemicals, Cement, and Auto Ancillaries are among the other core sectors in the fund's portfolio.

Is ICICI Pru Large & Mid Cap Fund suitable for my investment goals and risk tolerance?

While ICICI Pru Large & Mid Cap Fund has a history spanning over two and a half decades, its near-term performance is noteworthy. The fund has shown exemplary growth in the ongoing bull phase, outpacing the benchmark and the category average by a substantial margin. ICICI Pru Large & Mid Cap Fund has achieved this feat by focusing on its smart stock & sector selection strategy and avoiding momentum bets. Notably, the fund avoids exposing the portfolio to excess risk by focusing on fundamentally sound companies.

ICICI Pru Large & Mid Cap Fund avoids frequent churning in its portfolio and holds most of the stocks until their full potential is realised. Its focus on long-term investments and prudent risk management strategies enables it to generate competitive returns over the long run.

ICICI Pru Large & Mid Cap Fund is suitable for investors looking for a prudently managed scheme investing across large-cap and mid-cap space with an investment horizon of at least 5 years.

Watch this video to find out the best Large & Mid Cap Funds of 2024:

Note: This write up is for information purpose and does not constitute any kind of investment advice or a recommendation to Buy / Hold / Sell a fund. Returns mentioned herein are in no way a guarantee or promise of future returns. As an investor, you need to pick the right fund to meet your financial goals. If you are not sure about your risk appetite, do consult your investment consultant/advisor. Mutual Fund Investments are subject to market risks, read all scheme related documents carefully. Registration granted by SEBI, Membership of BASL and certification from NISM no way guarantee performance of the intermediary or provide any assurance of returns to investors.

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DIVYA GROVER is the co-editor for FundSelect, the flagship research service of PersonalFN. She is also the co-editor of DebtSelect. Divya is an avid reader which helps her in analysing industry trends and producing insightful articles for PersonalFN’s popular newsletter – Daily Wealth letter, read by over 1.5 lakh subscribers.
Divya joined PersonalFN in 2019 and has since then used stringent quantitative and qualitative parameters to analyse funds to provide honest and unbiased research to investors. She endeavours to enable investors to make an informed investment decision and thereby safeguard their wealth.

Disclaimer: Investment in securities market are subject to market risks, read all the related documents carefully before investing.
This article is for information purposes only and is not meant to influence your investment decisions. It should not be treated as a mutual fund recommendation or advice to make an investment decision in the above-mentioned schemes.

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