ICICI Securities ETF Intelligent Portfolios (EIP) Review

This is a review and FAQ of ICICI Securities ETF Intelligent Portfolios (EIP) a new multi-asset ETF basket product. We discuss the pros and cons and who should invest

Published: January 9, 2020 at 12:46 pm

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ICICI Securities Limited (I-Sec) via ICIC Direct has launched a new product, ETF- Intelligent Portfolios (EIP). This is similar to smallcase which was reviewed earlier but has some important differences. A discussion on what these are and who should consider investing in EIP.

Before we begin, a video lecture series on Goal-Based Portfolio Management: Techniques to reduce fear, uncertainty, & doubt has been launched. This will discuss strategies to use and manage the right asset allocation no matter what the market condition is. Details are available in this FAQ page.

What is ETF Intelligent Portfolios (EIP) by ICICI Direct? It is a multi-asset basket of low ETFs tracking four asset classes: large cap stocks, mid cap stocks, gold, bonds (gilts). The basket will be monitored daily with rebalancing triggers.

What the ETFs in the EIP basket?  These are the currently used ETFs: ICICI Prudential Nifty ETF, Nippon India ETF Nifty Midcap 150, Nippon India ETF Long Term Gilt, ICICI Prudential Gold ETF

What options are available in the EIP basket? Investors can choose the weights of the above four ETFs as per their risk appetite.  There are three options currently available: conservative (30% large cap, 0% midcap, 65% gilts, 5% gold); moderate (40% large cap, 10% midcap, 45% gilts, 5% gold); aggressive (50% large cap, 20% midcap, 25% gilts, 5% gold)

What are the charges? 0.15% (per quarter) of the quarterly average  Asset Under Advice (AUA),  plus GST. No brokerage on buying & rebalance transactions (as per portfolio rules) through the EIP platform

How much can one invest? Min Rs. 1000. SIP and lump sum options available

How is ETF Intelligent Portfolio different from Smallcase? Smallcase has different baskets with ETFs and stocks whereas EIP has only ETFs. The typical Smallcase basket is rebalanced periodically once a quarter or twice a year. EIP is monitored daily and rebalancing is triggered if there is a +/- deviation of 2.5% (min. Rs.250) in any ETF.

What are the tax implications? Tax as per standard rules applicable to equity mutual funds and non-equity mutual funds will be applicable on rebalance event and sale of the ETF units.

How have EIP portfolios fared in the past?  According to the product presentation, A lump sum investment made on Jan 3rd 2011 was monitored according to portfolio rules until June 13th 2019.

  • The aggressive portfolio was rebalanced 13 times with a 7-year rolling return spread of 10.45% (worst) to 13.99% (best).
  • The moderate portfolio was rebalanced 16 times with a 7-year rolling return spread of 9.41% (worst) to 12.64% (best).
  • The conservative portfolio was rebalanced 12 times with a 7-year rolling return spread of 8.28% (worst) to 10.26% (best).

It is important for readers to appreciate that these backtests were performed with indices and not with actual ETF prices.

How to start investing in EIP?  Via an ICICI Direct account. The product is available under the Research & Advisory section. One can take a risk profile questionnaire and get suggest ETF allocations if you wish to.

What are the advantages? Asset allocation managed on auto-pilot; The ETFs themselves have a low cost; no brokerage for auto-rebalancing

What are the disadvantages? 0.15% (per quarter) based on the current value of our investments; the possibility of frequent rebalancing; Tax incidence on each rebalance event; Any change in asset allocation made by the investor will be subject to a brokerage.

ICICI ETF Intelligent Portfolios vs Mutual Funds: Which is better? ICIC multi-asset mutual fund (review link) is an excellent one-fund portfolio suited for both newbies and risk-averse investors. This will handle the rebalancing without tax incidence. Tts direct plan should be of comparable or lower cost than the EIP making it a superior option.

ICICI ETF Intelligent Portfolios vs Smallcase: Which is better? Smallcase does not have an AUM linked fee like EIP. It has a flat-fee (in addition to brokerage) for rebalancing and higher purchases and other terms which are dependent on the smallcase basket. See the fee schedule for details. Also, the rebalancing for most smallcase baskets is periodic and not tactical (therefore less frequent). This possibly makes it less expensive of the two. Performance (risk/reward) depends on the type of basket chosen.

Should one invest in ICICI ETF Intelligent Portfolios? No.  A balanced-advantage mutual fund or multi-asset fund which combines tactical asset allocation should be a better alternative.

Summary: Such products although inviting at first-sight will work only for those who use these exclusively. This argument is also valid for the mutual fund alternatives such a multi-asset and other hybrid funds. Since this is unlikely for most people with a demat account, they are best avoided. Investors are better off ensuring their present investments are in-line with the asset allocation suitable for their goals.

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