ICICI Pru Flexicap Fund milestone: What is in it for investors?

The milestone achieved by ICICI Prudential Flexicap Fund, garnering Rs 10,000 crore, has grabbed headlines of the investing community and is a mind-boggling number indeed. But what does it really mean? We decode the figure for you and how it impacts you. To put the figure in perspective, all equity funds combined got an inflow of just Rs 5,988 crore in June 2021 compared to nearly Rs 10,000 crore in just 14 days in the ICICI Pru NFO. No other recent NFO has attracted even half of it in the last couple of months.

Why are flexicaps popular?

Not necessarily. Take into account all existing flexi cap funds for June 2021. They have seen net inflows of just Rs 1,087 crore. However, the flexicap category is indeed the second largest equity mutual fund category after largecap funds. It had Rs 1.76 lakh crore assets under management as on June 2021 compared to Rs 1.94 lakh crore in the largecap category.

“The flexicap funds allow fund manager to navigate across market capitalisation as per the market conditions. So, it’s a great idea to invest in a flexicap fund. However, what worked in ICICI Pru Flexicap Fund’s favour is the fund house’s brand image. People are looking for credible investment options,” says Mrin Agarwal, founder, Finsafe.

Other industry players agree. “Brand matters. If you see, the Navi Index Fund did not collect good amount of money even though it was marketed as the cheapest index fund. ICICI Pru has a strong team, a brand image and huge distribution capability. Retail investors look for credibility,” says an industry player who didn’t wish to be named.

It will be interesting to see how the next flexicap offering – Mahindra Manulife Flexicap Yojana NFO – will perform once it opens for subscription on July 30. The NFO will close on August 13.

Bigger and cheaper

The best part about such a huge inflow in the ICICI Pru Flexicap fund will be the expected low commission. The bigger the fund size the lower is the total expense ratio (TER). TER is the percentage of your investment that you pay to the fund house for the fund management. According to Sebi regulations on the expense ratio, the fund is expected to have just about 1 per cent TER.

A bubble in making?

Industry experts say they were surprised by the huge number given the fund house did not advertise the NFO aggressively. “The retail participation has been huge even though there was no advertising or marketing hype around it. The ICICI Pru team silently worked on it, focusing on the digital distribution,” says a market expert on condition of anonymity.

Agarwal acknowledges that it is a bull market phenomenon. “People get attracted to having NAVs at Rs 10. We see huge retail participation every time the markets are rising.”

The last time an NFO (Reliance Natural Resources Fund) had generated the highest ever funds at Rs 5,660 crore was in January 2008.

“Drawing parallel from then and now, the industry experts say that the similar situation is panning out now. “You had overpriced Reliance Power IPO in 2008. Similarly, you have large IPOs such as the ones from Zomato and Paytm. It is hard to predict the market peak. So, one never knows if the bubble has been created, but a build up to the bubble is definitely there,” says the industry expert.

A lot of investors must be feeling missed out. Given a chance, they may want to take exposure in ICICI Pru Flexicap Fund. However, any investment decision should be taken if it aligns with your life goals. Don’t invest in new products just because everyone else is doing. Invest as per your portfolio concentration and risk appetite.