ICICI Prudential Mutual Fund has introduced a new passive Fund of Funds that automatically adjusts stock and debt holdings based on valuation models. The NFO subscription is open until September 9, 2026. This scheme aims to remove human bias from asset allocation and improve tax efficiency by managing rebalancing internally, though investors face 'Very High' market risk.
ICICI Prudential Mutual Fund has launched the 'Dynamic Asset Allocation Passive Fund of Funds' (FOF), a new investment scheme that uses a rules-based system to manage money. The fund's primary objective is to shift capital between equity (stocks) and debt (bonds) based on pre-defined valuation metrics rather than human opinion. The New Fund Offer (NFO) opened for subscription on August 26, 2026, and will remain available for investors until September 9, 2026.
At its core, this scheme acts as a 'fund of funds,' meaning it does not buy individual stocks or bonds directly. Instead, it invests in other passive vehicles like index funds and exchange-traded funds (ETFs). The decision on how much to allocate to equities versus debt is governed by an in-house Equity Valuation Index (EVI). This model tracks economic indicators such as price-to-earnings and price-to-book ratios, G-Sec-adjusted earnings, and the size of the equity market relative to the country's GDP. When the market appears expensive, the model shifts capital toward debt; when it appears undervalued, it increases equity exposure.
One of the practical benefits of this structure is tax efficiency during portfolio rebalancing. In a standard investment strategy where an investor manually moves money between different schemes to maintain a desired asset mix, each sale can trigger capital gains tax. Because this fund manages the shift between asset classes internally, those individual transactions do not attract immediate tax for the investor. Taxation is only applied when the investor decides to redeem their units from the fund itself.
Investors should note that the fund is categorized under a 'Very High' risk profile. This rating reflects the nature of equity investments and the reality that passive strategies rely entirely on the performance of the underlying indices. As with all new fund launches, this scheme has no historical performance data, making it difficult to assess how the model will perform across different economic cycles. The fund will be managed by a team including Manish Banthia, Manan Tijoriwala, Ritesh Lunawat, Sharmila D'Silva, and Nishit Patel, and it is benchmarked against the CRISIL Hybrid 50+50 Moderate Index.
For those interested in participating, the minimum investment threshold is set at ₹1,000. There is no entry load, but the fund carries an exit load of 1% if an investor redeems more than 30% of their units within the first 12 months. Investors may monitor how the fund’s model-based allocation compares to the benchmark index once the fund becomes operational and begins generating performance data after the NFO period concludes.