ICICI Prudential MIP 25: One of the most consistent Mutual Fund Monthly Income Plans

ICICI Prudential MIP 25 has been one of the most consistent mutual fund Monthly Income Plans (MIPs) over the last 5 years. The fund has consistently been in the top two quartiles every year over the last 5 years (please see the Most Consistent Debt Oriented Hybrid Funds in our Mutual Fund Research Section). Monthly Income Plans (MIPs) are debt oriented hybrid mutual funds, where the equity allocations range from 5 to 30%, while debt and money market securities account for the remaining asset allocation.

Monthly Income Plans (MIPs) are ideal for conservative investors looking for inflation beating investment returns for their long term financial needs. The high debt component ensures low risk and stability of income, while the equity component can give capital appreciation over a sufficiently long investment horizon. In the last one year debt oriented hybrid funds on an average gave 13.4%, just 1.5% less than the average returns of large cap equity funds (please see our Mutual Fund Category Monitor). On the other hand in 2015, when large cap funds on average gave negative returns, debt oriented hybrid funds gave 6% more returns. This shows that while upturn in equity markets provide a kicker to MIP returns, their downside is protected in bear market to large extent due to the high debt component.

ICICI Prudential MIP 25 is one of the best performing MIPs in the last 5 years. The chart below shows the annual returns of ICICI Prudential MIP 25 from 2011 to 2015.

Source: Advisorkhoj Research

You can see that, the fund always gave positive returns even in bear markets. In the last one year the fund gave 14.4% returns almost matching the average large cap fund returns, despite the high (more than 75%) debt component. Morningstar has a 4 star rating for this fund.

ICICI Prudential MIP 25 fund was launched in 2004 and has Rs 1,218 Crores of Assets under Management (AUM). The expense ratio of the fund is 2.06%. For units in excess of 10% of the investment, the fund charges an exit load of 1% for redemption within 365 days. Apart from the Growth Option, the fund also has bonus, half yearly, quarterly and monthly dividend options. Manish Banthia and Rajat Chandak are the fund managers of this scheme. The chart below shows the NAV movement of ICICI Prudential MIP 25 over the last 5 years.

Source: Advisorkhoj Research

Rolling Returns of ICICI Prudential MIP – 25

The chart below shows the 3 year rolling returns of the ICICI Prudential MIP – 25 over the last 6 years. We chose a 6 year period because we wanted to see the impact of two bear market years on the fund’s rolling returns.

Source: Advisorkhoj Rolling Returns Calculator

You can see that the rolling returns were above 10% around 90% of the times; in other words, over the last 6 years, if you had a 3 year investment horizon, you had a 90% chance of getting double digit annualized returns. The minimum rolling return was 7.5%, while the maximum was more than 15%. The chart above also tells you that, the ICICI Prudential MIP – 25 consistently outperformed the Hybrid debt oriented mutual funds over the last 6 years in terms of 3 year rolling returns.

Portfolio of ICICI Prudential MIP 25

Scheme invests 70 to 100 per cent in money market and debt instruments and up to 30 per cent in equity securities. Current asset allocation is 24% equity and about 76% fixed income and money market instruments. The modified duration of the bond portfolio is around 4 years and the yield to maturity is 8.25%. The fund is moderately sensitive to interest rate changes. The credit quality of the bond portfolio is very high. 86% of the bonds are AAA rated and 9% are AA rated. The equity portfolio is large cap oriented with a bias for cyclical sectors (e.g. banks, consumer cyclical etc.)

SWP from ICICI Prudential MIP - 25

If you invested Rs 5 Lakhs in ICICI Prudential MIP – 25 five years back and drew Rs 4,000 every month (we do not want the annual withdrawals to exceed 10% of the initial investment to avoid exit loads) through Systematic Withdrawal Plan (SWP), you could have withdrawn Rs 240,000 over the last years and yet the current value of your balance units would be Rs 5.5 Lakhs, which is more than your initial investment amount. In fact, monthly SWP from ICICI Prudential MIP – 25 over the last 5 years is among the best performing SWPs among all debt oriented hybrid funds (please see Top SWP Funds in our Mutual Fund Research Section). The chart below shows the cash flows in the SWP.

The red line shows the value of the investment and the blue bars at the bottom show the monthly SWP. Please note that the Value and the SWP are plotted on different vertical axes; value is plotted using the axis on the left, while SWP is plotted using the axis on the right. In the last 5 years, the investment value dipped below the initial investment for only about 9 months, even though the investor was drawing around 10% of the initial investment per annum.

Conclusion

ICICI Prudential MIP 25 is one the best performing MIPs in the last 5 years. The SWP performance of the fund has been exceptional. Investors should have a long investment horizon for this fund. Conservative investors who can afford to take a little risk can invest in this fund, for their long term financial needs. Investors should consult with their financial advisors if ICICI Prudential MIP – 25 is suitable for their investment needs.