Is it worth investing in the ICICI Pru Commodities Mutual Fund?

ICICI Pru Commodities Mutual Fund is a mutual fund focused on investing in companies that are dependent on commodities like crude oil, cotton, sugar, manganese, iron, copper, etc. for making an end product for sale in the domestic and international market

Fund House: ICICI Prudential

Commodities by nature are very turbulent and are vulnerable to

  1. Climatic Conditions like tsunamis, drought, hurricanes, floods, etc.
  2. Geopolitics like war, coups, blockades, etc.
  3. Output Variations from existing mines, etc.
  4. Trade-related actions like Tariff Barriers, Export Bans, Cess, etc.
Different Commodities

Now coming to the Mutual Fund – ICICI Pru Commodities

  • The scheme was launched on 15th Oct 2019
  • The Expense Ratio for Direct Scheme is 1.05% (as of 31st Dec 2021)
  • It does not have any lock-in
  • It carries an exit load of 1% for redemption within 90 days
  • Its Asset Under Management > ₹700 Cr (as of 31-Dec-2021)

The Funds Top 5 Holdings are companies that are primarily focused on tapping into commodities like Iron Ore, Bauxite, Pet Coke, etc.

Top 5 Holdings of the Mutual Fund

Accordingly, the overall allocation of the Mutual Fund covers mostly all the private and public sector companies that are commodity-intensive and serve the domestic & international market

Asset Allocation – 1
Asset Allocation – 2

The benchmark of comparison for the Commodity-linked Mutual Fund is the NIFTY Commodities TRI. The fund since launched ~45% returns.

Return of the Mutual Fund in Different Intervals

Considering all the above factors, the following can be stated:

  1. Commodities(direct or indirect) can provide a hedge against inflation
  2. Commodities intensive companies can raise prices to retain margins
  3. Markets adjust around the price fluctuations of commodities(like crude oil)
Covid-19 Pandemic

Having said this, any downturn in commodities or major correction in the stock market based on events like Covid-19, high inflation, the current Ukraine crisis, etc. can be used to invest in the Mutual Fund. Use SIPs to invest and keep a horizon of 5–10 years to see exceptional returns.

Hope this helps

You can follow my blog or Facebook page on investing for getting insight into other stocks.

Happy Investing!!

References:

  1. https://www.icicipruamc.com/mutual-fund/equity-funds/icici-prudential-commodities-fund
  2. ICICI Prudential Commodities Fund – Regular Plan-Growth [24.06] | ICICI Prudential Mutual Fund – Moneycontrol
  3. https://www.valueresearchonline.com/funds/40304/icici-prudential-commodities-fund/
  4. Do commodities investments offer a good return? Details, benefits explained with Warren Buffett’s experience

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