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New Fund Focuses on Value Stocks
ICICI Prudential Life Insurance has launched the ICICI Prudential Life BSE Enhanced Value 30 Index Fund. This Unit Linked Insurance Plan (ULIP) will invest in up to 30 companies from the BSE LargeMidCap universe. Stocks are chosen based on valuation metrics like price-to-book, earnings-to-price, and sales-to-price ratios. The fund passively tracks the ICICI PRU BSE Enhanced Value Index using a systematic, rules-based approach. It includes regular portfolio adjustments, semi-annual index reviews, and limits on stock and sector exposure for diversification. The goal is to offer investors long-term equity growth in fundamentally undervalued companies.
Index Shows Strong Historical Returns
Company data shows the ICICI PRU BSE Enhanced Value Index has performed strongly historically. As of March 30, 2026, the index achieved annualized returns of 32% over three years, 28.9% over five years, and 19.4% over ten years. These results suggest it may have outperformed major indices like the Nifty 50 and BSE Sensex, which typically returned 16-18% annually over five years. However, market performance is cyclical. The success of this value strategy will depend on how it performs against current market conditions and changes between value and growth investing.
High Costs Compared to Direct Funds
Although the fund is passive, its inclusion in a ULIP structure leads to higher costs. ULIPs typically have higher expense ratios than simple index funds. These costs include insurance charges, administration, and sales commissions, often resulting in annual expenses of 1.8% to 2.7% or more for passive ULIPs. This compares to direct equity index funds, which usually charge less than 0.5%. As a result, the cost savings expected from a passive index fund are reduced within the more expensive ULIP wrapper. Investors need to consider this alongside other options, such as ULIPs with active management or broader index choices, and direct equity index funds.
Challenges: Market Cycles and ULIP Drawbacks
A key challenge for this fund is its exclusive focus on value stocks. Value investing can be rewarding but has often lagged when growth stocks lead the market, a trend seen in Indian equities recently. The BSE LargeMidCap segment, where the index gets its stocks, can be volatile, with mid-caps often seeing bigger price swings than large-caps. Additionally, ULIPs have structural drawbacks, including longer lock-in periods and fixed charges, which can greatly reduce net returns, especially for low-cost strategies. The fund's success will depend on its ability to consistently earn returns that cover these costs and beat gains from growth sectors or cheaper investment options.
Long-Term Viability Hinges on Net Returns
The fund's long-term success will depend on its ability to consistently outperform benchmarks after all costs are deducted. Investors will look at its risk-adjusted returns and its performance in different market conditions. The overall success of the ICICI Prudential Life BSE Enhanced Value 30 Index Fund hinges on whether its value-picking method can offer a lasting advantage within the ULIP structure, providing the promised exposure to attractively valued stocks.