ICICI Prudential Regular Savings Fund, a conservative hybrid fund, has consistently outperformed its peers by generating debt-plus returns over the years. Its strategy of combining a large-cap-oriented equity portfolio with a high-yield debt portfolio has enabled it to earn superior risk-adjusted returns.
Over the past 10 years, the fund has posted a compounded annual growth rate (CAGR) of 9 per cent, comfortably ahead of the category average of 7.3 per cent.
Conservative hybrid funds are meant for low- to moderate-risk investors seeking limited equity exposure. These funds typically invest 75-90 per cent of their corpus in debt and 10-25 per cent in equities. The debt allocation provides stability and regular income, while equities add a growth kicker.
The fund has maintained an equity allocation of 15-24 per cent over the past five years, adjusting it in line with market conditions, while the balance has been invested in debt instruments.
Equity strategy
The fund follows a blend of top-down and bottom-up investing. It first identifies sectors likely to benefit from the prevailing economic and business cycle. For instance, during economic slowdowns, the portfolio is tilted towards defensive and resilient businesses. Within these preferred sectors, the fund selects fundamentally-strong companies with attractive valuations.
Portfolio construction follows a disciplined framework that combines sector attractiveness with stock-specific opportunities. The largest allocation is made to companies where both the sector outlook and stock fundamentals are favourable. Smaller allocations are made to attractive sectors with selective opportunities or to strong companies in weaker sectors with long-term growth potential. The fund avoids sectors and stocks where both the outlook and fundamentals are weak.
It also follows a contrarian approach, looking for stocks that are temporarily out of favour but have limited downside and meaningful long-term upside. Stock selection is backed by detailed valuation analysis to ensure a margin of safety rather than chasing momentum.
The fund is currently overweight in large private banks, life insurers, select IT, chemicals and pharma stocks. It stays underweight in capital market-linked businesses, industrials, consumer discretionary and e-commerce companies.
As per the latest portfolio, the top three sector exposures were banks, insurance and automobiles. Over the last year, the fund increased exposure to retailing, food products and banks while trimming exposure to pharma, oil and cement products.
In terms of market-cap bias, nearly two-thirds of the equity allocation is invested in large-caps, with the balance in mid- and small-caps. Currently, around 13 per cent of the total assets are invested in large-caps, 3 per cent in mid-caps and 6 per cent in small-caps.
Debt strategy
On the debt side, the fund follows an actively-managed strategy with a flexible mandate. The portfolio comprises government securities, high-quality corporate bonds, PSU debt and select private corporate bonds up to the single-A rating. The portfolio duration has been kept moderate, with a Macaulay duration of 1.25-3.5 years over the past five years.
As of the latest portfolio, government securities accounted for 17 per cent of the corpus, while corporate debt accounted for 52 per cent, pass-through certificates 3 per cent and certificates of deposit 2 per cent.
A distinguishing feature of the fund is its meaningful exposure to non-AAA-rated debt, which typically ranges between 30 per cent and 50 per cent of the portfolio. It is among the few conservative hybrid funds with sizeable allocations to this segment, alongside Nippon India Conservative Hybrid, SBI Conservative Hybrid and Aditya Birla Sun Life Regular Savings. In the latest portfolio, AAA-rated securities accounted for 11 per cent, AA-rated papers 39 per cent and single-A securities 6 per cent.
The fund generally limits the maturity of its non-AAA holdings to two-three years to contain credit risk. Key issuers in this segment include Prism Johnson, Kogta Financial (India), Ashiana Housing and Hiranandani Financial Services.
The debt portfolio’s yield to maturity (YTM) stood at 8 per cent, compared to category average of 7.2 per cent.
Superior performance
ICICI Prudential Regular Savings Fund has consistently exhibited superior risk-adjusted returns across most equity and interest rate cycles.
An analysis of five-year rolling returns over the last seven years shows that the fund generated an average annualised return of 9.7 per cent, outperforming the category average of 8.7 per cent. Its five-year rolling returns ranged from a minimum of 8.2 per cent to a maximum of 11.6 per cent.
On a three-year rolling basis, the fund delivered an average CAGR of 9.6 per cent, compared with the category average of 8.8 per cent.
Its base expense ratio for the regular plan is 1.42 per cent, marginally below the category average of 1.44 per cent. The direct plan’s expense ratio stands at 0.8 per cent, compared with the category average of 0.75 per cent.
The fund aims to generate returns superior to traditional debt investments while limiting downside risk through a predominantly debt-oriented portfolio.
It may be suitable for investors with a low- to moderate-risk appetite seeking modest equity exposure over a medium-term investment horizon.
Published on July 18, 2026