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ICICI Pru Contra

Scheme Rating

IME Scheme Rating

The Scheme does not meet our selection criteria at this time

Investment Option: Can invest in other Contra Portfolios where FM has a higher conviction and strong investment team.

IME Strategy Rating

Strategy Definition not as tight as our preferences: Well-executed contra approach to investing can deliver substantial outperformance when executed well. But contra is often a difficult strategy to implement in practice, since it involves going against popular perceptions, and requires a fund manager with a very high level of conviction to pull off. We do not see this being implemented in this strategy (which has several in-favour stocks as part of the portfolio). There also appears to be confusion between the stated objectives of ‘a focused portfolio’ and ‘optimal diversification’.

PMS Scheme Ratings are driven by IME’s Proprietary Scheme Rating Methodology, which takes into account our ratings of the Scheme’s investment strategy, its maturity, the investment team, and our separate rating on the AMC that runs this particular scheme. Our views on each of these individual criteria are available via the IME RMS – which you can view by reaching out to one of our relationship managers (using either the live chat or book appointment feature on this site).

IME View on ICICI Pru Contra

Type: Contra | Value | AUM (4953.9 cr) | Inc Date (14 Sep 2018)

ICICI Contra Portfolio- Investment Strategy

ICICI Pru PMS Contra Strategy follows a contrarian investment style (investing in underperforming and out-of-favour stocks & sectors). The strategy is market-cap agnostic and aims to have a focused portfolio with an optimal level of diversification.

Investment Strategy 

Contra Portfolio follows contrarian investment style which is driven by: 

  • Out of the flavour: Investing in companies where prevailing sentiments not positive 
  • Focus: Widespread pessimism about company can drive price low. Prices tend to overstate the risk and understate the prospects of recovery. 
  • Avoid: Widespread optimism leads to high valuation that may in turn lead to correction when valuations are not justified by fundamentals.
  • Herd Behaviour: Observe the herd behaviour as prices of stocks are pushed by investors to unsustainable level in both direction. Over reaction by market participants lead to underperformer become under valued and outperformer become over valued. 
  • Market Efficiency: Also observe the market efficiency as investor behaviour causes market to deviate from fundamental values creating inefficient markets. 

Investment Process

  • Identification: Identifying sectors or companies facing temporary headwinds. 
  • Selection Criteria: Selection based on ROE, ROCE, Market Cap by cash profit, P/E, Corporate Governance and capital allocation track record. 
  • Portfolio Construction: The portfolio is constructed by choosing sectors/companies which are facing temporary stress and are expected to survive in long. 

Investment Framework 

They utilise a 3 filter framework in order to search for companies with meaningful and sustainable earnings growth

  1. Business
  2. Management 
  3. Valuation 

Business Economics:

  • Growth defined by Company growing faster than industry, industry faster than market, that are also looking for Structural and long-term sustenance and are simple to understand and in a focused segment. 
  • Moats defined by Brand Franchise, Industry Structure, Technology/Patents, Cost Advantage, License area, Distribution, etc

Management and Governance 

  • Competence driven by Sales(Faster than sector); Margin(Improving); Capital(Smarter)
  • Governance based on Interests(Aligned with shareholders); and having credible Track Record 

Valuation 

  • Cash- Cash flow being the centre of investment Process (Intrinsic value, DCF, Dividend Yield, Op. Cash Yield, etc)
  • Evaluate Margin of Safety- Identifying a greater margin of safety based on weaker moat for a better risk-reward profile.

Trailing Performance

1yr 3yr 5yr Since Inception
ICICI Pru Contra 52.8 28.4 24.3 21.9
S&P BSE 500 TRI 39.5 19.5 19 15.7
Alpha over Broad Mkt BM 13.3 8.9 5.3 6.2

Performance as of: 28-Feb-23 | Inception Date: 14-Sep-18

Fund Managers

Anand Shah | 4-star rated FM

Fund Manager | 24 yrs Experience | 3 yrs at current firm

Past Experience: VP investments (Kotak MF), Co-Head Equities (ICICI Pru AMC), Head Equities (Canara Robeco AMC), Dy CEO & Head of Investments (BNP Paribas Asset Management), CEO (NJ Asset Management)

Chockalingam Narayanan

Fund Manager

Chockalingam Narayanan has over 17 years of extensive experience in Fund Management, Investment Research and Market Analysis. He has been instrumental in analysing business fundamentals to derive relevant and actionable analysis that has portfolio growth. He is consistently relied upon for providing detailed analysis of the macro-economy, financial markets and ESG that serve as some of the key foundation pillars for the various investment strategies that he has worked with in his career. In his career, he has earlier worked with leading organisations like Baroda BNP Paribas Asset Management India Pvt Ltd, Deutsche Equities India Private Limited and Batlivala & Karani Securities.

Fee Structure

Fee StructureFee
Fixed Fee Structure2.5
Variable Fee Structures1.5% fixed + 15% above 10% hurdle
Exit Fees1yr (1%)

AMC

AMC: ICICI Pru PMS (click link for detailed AMC review)

Not a top recommendation due to being an AMC-driven PMS: ICICI Pru PMS suffers from the common ailments of large AMC-driven PMS houses (PMS as an add-on instead of a segregated business unit, churn in the investment team, a lack of skin in the game for the CIO and typically loosely defined investment philosophies). While the distribution strengths of the AMC can help the PMS scale and there are benefits of research access, most AMC drove PMSs cannot compare to strong CIO-cum-founder driven PMS houses.

AMC Rating

3 of 5 stars

AMC Pedigree

3 of 5 stars

AMC Size

5 of 5 stars

Team Pedigree

3 of 5 stars

Inv Philosophy

2 of 5 stars

Performance

3 of 5 stars

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