This edition of the fund performance report looks at ICICI Prudential Value Discovery Fund. One of the best-known value-oriented funds in the country with one of the best-known fund managers, Sankaran Naren. Naren was fund manager up to Feb 2011. He got back on the team in Jan 2021, perhaps to help the fund back on its feet.
Disclaimer: Fund performance reports present return and risk analysis of a fund with representative benchmarks and not investment recommendations. It must be expressly understood that the data below reflect only past performance and is in no way an indication of future performance. Our investment recommendations are: Handpicked List of Mutual Funds (PlumbLine).
If there were a fund name that succinctly conveyed what its goal is, Value Discovery would qualify. The broad goal is to buy companies trading lower than their intrinsic value before others (the market) “discover” (or re-discover) them.
Value investing immediately sounds glamorous to the newbie investor. Most people do not tell you that it is quite risky relative to buying a market cap-oriented index like the Nifty or Sensex. Whether you are a value-oriented stock or mutual fund investor, you must be ready to go through years and years of underperformance.
The fund conveniently changed its benchmark from S&P BSE 500 to the Nifty 500 Value 50 Index. The new benchmark is quite easy to beat. Quant-based value investing rarely works! See: Is it time to exit ICICI Value Discovery & Quantum Long Term Equity? This article also has the PE, PB, Div Yield History of the fund.
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Months before the March 2020 crash, the fund failed to beat the S&P BSE 500 over the trailing 1,2,3,4,5 year (see above link). Today things are quite different! Whether it is due to Naren’s re-entry or not is hard to prove conclusively.
According to the Sep 2022 freefincal equity mutual fund performance consistency screener, things look quite different today.
| Tenue | Nifty 100 TRI | ICICI Prudential Value Discovery Fund – Direct Plan – Growth |
| 1Y | 3.777% | 13.016% |
| 2Y | 25.499% | 32.354% |
| 3Y | 19.302% | 25.300% |
| 4Y | 12.099% | 14.589% |
| 5Y | 13.113% | 14.641% |
While this is a just reward for investors who have suffered with the fund, such performance is unlikely to last. One cannot but wonder when the fund would start underperforming again (not if, when) and if/when Naren would again exit the fund or, worse, the AMC.
Now let us look at how consistently the fund has performed with respect to Nifty 100 TRI.
1 Rolling return outperformance consistency: the fund returns are compared with category benchmark returns over every possible 3Y,4Y, and 5Y period. Higher the outperformance consistency, the better. Suppose 876 fund returns were compared with 876 benchmark returns, and the fund has beaten the benchmark 675 times. The consistency score will be 675/876 ~ 77%.
Three years
| Metric | ICICI Prudential Value Discovery Fund – Direct Plan – Growth vs Nifty 100 TRI |
| No of rolling return entries Index (3 Years) | 1639 |
| No of rolling return entries Fund (3 years) | 1639 |
| No of times fund outperformed the index (3 years) | 843 |
| rolling return outperformance Consistency Score (3 years) | 51% |
| Metric | ICICI Prudential Value Discovery Fund – Direct Plan – Growth vs Nifty 100 TRI |
| No of rolling return entries Index (4 Years) | 1396 |
| No of rolling return entries Fund (4 years) | 1396 |
| No of times fund outperformed the index (4 years) | 701 |
| rolling return outperformance Consistency Score (4 years) | 50% |
Five years
| Metric | ICICI Prudential Value Discovery Fund – Direct Plan – Growth vs Nifty 100 TRI |
| No of rolling return entries Index (5 Years) | 1147 |
| No of rolling return entries Fund (5 years) | 1147 |
| No of times fund outperformed the index (5 years) | 543 |
| rolling return outperformance Consistency Score (5 years) | 47% |
Star fund manager or not, enticing fund name/strategy or not, that is consistently poor performance!
2 Upside performance consistency over every possible 3Y,4Y, 5Y: Higher the better. A score of 70% means, 7 out of 10 times, the Fund performed better than the category benchmark when the benchmark was moving up. This is a measure of reward. It is computed from rolling upside capture data (see link below).
| Metric | ICICI Prudential Value Discovery Fund – Direct Plan – Growth vs Nifty 100 TRI |
| upside performance consistency (3 years) | 27% |
| upside performance consistency (4 years) | 25% |
| upside performance consistency (5 years) | 23% |