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Suresh Krishnamurthy

FRESH investments in Prudential ICICI's Dynamic Plan need not be considered. The fund's performance since inception in October 2002 has not been impressive. However, investors in the fund can continue to hold since the fund has been in existence for only a short period. Investors can consider afresh after studying the performance of the fund over the next few months.

Performance: Since the launch of the fund in October 2002, the fund has delivered returns of about 23.4 per cent. This is lower than the performance reported by some of the established funds during this period. Importantly, relative performance in the last six months has been poor compared to that in the initial couple of months.

The deceleration may be mainly due to the sharp changes in cash flows into the fund and may not be a reflection on the fund manager's ability.

Portfolio allocation: The size of assets under management has fluctuated in the months since inception. It rose from Rs 42 crore at the end of December to Rs 92 crore at the end of April 2003 only to decline sharply to Rs 72 crore at the end of May 2003.

This has had an effect on the invested position of the fund — proportion of cash to net assets has generally been high since launch, barring a couple of months. If fund inflows and outflows continue to be volatile, it will have a deleterious impact on fund performance.

In the few months since launch, the fund has delivered on part of its promise — to actively and aggressively manage the equity fund.

The fund has moved in and out of the sectors quite aggressively over the past few months. The fund has altered the invested position substantially in even a sector such as banking, which has generally enjoyed a secular rise in price in the last few months.

With regard to allocation to sectors, exposure to any one of the sectors has always been maintained at less than 20 per cent at all times.

The top sectors at the end of May 2003 were banks, IT consulting, automobiles, oil and gas and media. These sectors accounted for 57 per cent of net assets.

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