ICICI Prudential Mutual Fund launches Diversified Equity All Cap Active FOF

ICICI Prudential Mutual Fund on Wednesday announced the launch of the ICICI Prudential Diversified Equity All Cap Active FOF, an open-ended fund of funds scheme that will invest predominantly in units of diversified domestic active equity-oriented schemes across market capitalisations. The new fund offer will be open from March 2 to March 16. The benchmark for the scheme is the Nifty 500 TRI.

The scheme is designed to dynamically allocate investments across large-cap, mid-cap, and small-cap strategies using an in-house valuation and market-cap framework. The underlying portfolio aims to provide diversification across investment styles while enabling calibrated participation across market segments.

Commenting on the launch, Sankaran Naren, ED and CIO at ICICI Prudential AMC, said, “Market cycles in recent years have seen phases of exuberance followed by corrections across segments. Behavioural biases often push investors toward recent outperformers, which can result in suboptimal outcomes. Through this fund of funds, we aim to provide investors access to a structured market-cap allocation framework that remains responsive to changing market dynamics, combining flexibility with discipline for measured participation across the market-cap spectrum.”

Case for investing across market caps

Equities have historically generated wealth over the long term, despite periodic volatility. However, no single market-cap segment consistently outperforms. Mid- and small-cap stocks tend to deliver sharper rallies during exuberant phases but also experience steeper drawdowns during corrections. Leadership rotates among large caps, midcaps, and small caps across different phases of the market cycle.

An all-cap approach can help offset underperformance in one segment with strength in another, making portfolios more resilient. However, identifying the right market-cap segment at the right time remains challenging. The ICICI Prudential Diversified Equity All Cap Active FOF seeks to address this by dynamically investing across market caps through active equity schemes, guided by an in-house market-cap framework based on prevailing and dynamic market parameters.

Why now?

Indian equities delivered strong returns across market-cap segments until 2024, after which domestic market exuberance moderated and valuations tapered, indicating a reduction in froth. Simultaneously, developments such as income tax cuts, GST reductions, and a decline in interest rates have provided meaningful support to the economy, creating a favourable growth environment.

As a result, India’s relative positioning has improved, with equity valuations moderating compared with a year ago and appearing more attractive relative to several global markets. However, geopolitical tensions, complex trade dynamics, volatile FII flows, and global monetary policy uncertainty continue to drive market volatility. In this environment, schemes with the flexibility to invest across market caps within a structured framework may enable calibrated participation across evolving market cycles.

Investment Process

The investment process follows a structured, top-down framework anchored in continuous monitoring of macroeconomic and microeconomic indicators. Key variables such as growth trends, inflation dynamics, interest rate cycles, domestic demand conditions, and global market developments are evaluated to form an overall view on equities.

Based on this assessment, the relative attractiveness of different market-cap segments is determined using fund manager insights and an in-house analytical framework. This evaluation guides allocation decisions across large-cap, mid-cap, and small-cap strategies, with underlying schemes selected to reflect the prevailing market-cap outlook.

(Disclaimer: Recommendations, suggestions, views, and opinions given by the experts are their own. These do not represent the views of The Economic Times)