ICICI Pru Money Market Fund Review: When & how to use it

This is a review of ICICI Pru Money Market Fund, its portfolio duration and credit style history and a guide on when and how to use it

Published: March 8, 2020 at 11:40 am

Last Updated on

This week, we shall review a debt mutual fund: ICICI Pru Money Market Fund. This is an open-ended money market mutual fund that invests in bonds maturing within a year.  Its credit risk profile is fairly low. Although typically intended for short-term use it can also be considered for goals more than a few years away.

A money market fund is one that invests in short-term bonds. A money market is a place where cash is borrowed for short periods of time ranging from a day to a few months.   These bonds are less sensitive to interest rate changes due to their short-term nature.

Fund managers in this space tend to follow a buy-hold-buy-again approach or accrual strategy. The NAV growth is predominantly from interest payments and the fund managers typically do not sell the bond mid-way for capital gains.

According to the scheme document, ICICI Pu Money Market Fund “seeks to provide
reasonable returns, commensurate with low-risk while providing a high level of liquidity”.

This is the portfolio maturity history of the fund. Non-maturity units refer to cash and the cash above 100% refers to debt arbitrage exposure (with a matching contribution below 100% cancelling it off).

Portfolio Maturity History of ICICI Pru Money Market Fund
Portfolio Maturity History of ICICI Pru Money Market Fund

The fund has been a short-term bond fund even prior to the SEBI regulations. Asset-type history is shown below.  The fund has a reasonable track record of good quality credit. However, this is not an indication of its future credit quality.

Asset Type History of ICICI Prudential Money Market Fund
Asset Type History of ICICI Prudential Money Market Fund

The AUM and expense ratio evolution is shown below.  The huge drop in AUM is possibly an institutional shift to overnight funds after the SEBI categorization rejig. Being a fairly liquid fund, it can withstand such AUM swings. The expense ratio has been fairly stable in the last few months but could increase when the AUM picks up.

AUM growth and expense ratio history of ICICI prudential money market fund
AUM growth and expense ratio history of ICICI prudential money market fund

These are the trailing returns of the fund as on March 6th 2020. Please note past returns are not indicative of future returns or performance. You can expect this fund to do a little better than a liquid fund with similar credit quality if there are no credit events.

YearsCAGR %

Should you consider ICICI Money Market Fund, if yes, when? First, this fund will be a little more volatile (daily NAV fluctuations) than a liquid fund. So it is not advisable to use it for less than a year.

At the time of writing the fund has a good track record of credit quality and has not suffered any credit downgrades. While this may or may not persist in future, it is enough to consider it for investment for more than a year and up.

It could also be used for regular income via withdrawals provided it is suitable for the investor and the individual is aware of associated risks.

It is worth taking more risk by choosing such funds than a liquid fund? A liquid fund also suffers from the same risks as money market funds. Its credit profile could also change in future. For short durations, a liquid fund is better. For longer durations (1 year plus) those who prefer a bit more return but with reasonably safe credit quality can consider this fund.

Do share if you found this useful
Share your thoughts on this topic at the  Reddit freefincal_user_forum

Reach your financial goals like a pro! Join our 1600+ Facebook Group on Portfolio Management! You can now reduce fear, doubt and uncertainty while investing for your financial goals! Sign up for our lectures on goal-based portfolio management and join our exclusive Facebook Community. The 1st lecture is free!
Want to check if the market is overvalued or undervalued? Use our market valuation tool (will work with any index!) or you buy the new Tactical Buy/Sell timing tool!
About the Author Pattabiraman editor freefincalM. Pattabiraman(PhD) is the founder, managing editor and primary author of freefincal. He is an associate professor at the Indian Institute of Technology, Madras. since Aug 2006. Connect with him via Twitter or Linkedin Pattabiraman has co-authored two print-books, You can be rich too with goal-based investing (CNBC TV18) and Gamechanger and seven other free e-books on various topics of money management. He is a patron and co-founder of “Fee-only India” an organisation to promote unbiased, commission-free investment advice. He conducts free money management sessions for corporates and associations on the basis of money management. Previous engagements include World Bank, RBI, BHEL, Asian Paints, Cognizant, Madras Atomic Power Station, Honeywell, Tamil Nadu Investors Association. For speaking engagements write to pattu [at] freefincal [dot] com
About freefincal & its content policy Freefincal is a News Media Organization dedicated to providing original analysis, reports, reviews and insights on developments in mutual funds, stocks, investing, retirement and personal finance. We do so without conflict of interest and bias. Follow us on Google News Freefincal serves more than one million readers a year (2.5 million page views) with articles based only on factual information and detailed analysis by its authors. All statements made will be verified from credible and knowledgeable sources before publication. Freefincal does not publish any kind of paid articles, promotions or PR, satire or opinions without data. All opinions presented will only be inferences backed by verifiable, reproducible evidence/data. Contact information: letters {at} freefincal {dot} com (sponsored posts or paid collaborations will not be entertained)
Connect with us on social media
Our publications

You Can Be Rich Too with Goal-Based Investing

You can be rich too with goal based investingPublished by CNBC TV18, this book is meant to help you ask the right questions, seek the right answers and since it comes with nine online calculators, you can also create custom solutions for your lifestyle! Get it now. It is also available in Kindle format.
Gamechanger: Forget Startups, Join Corporate & Still Live the Rich Life You Want Gamechanger: Forget Start-ups, Join Corporate and Still Live the Rich Life you wantThis book is meant for young earners to get their basics right from day one! It will also help you travel to exotic places at low cost! Get it or gift it to a young earner

Your Ultimate Guide to Travel

Travel-Training-Kit-Cover-new This is a deep dive analysis into vacation planning, finding cheap flights, budget accommodation, what to do when travelling, how travelling slowly is better financially and psychologically with links to the web pages and hand-holding at every step. Get the pdf for Rs 199 (instant download)
Free android apps