ICICI Prudential Mutual Fund launches diversified all-cap active FoF; NFO open till March 16

ICICI Prudential Mutual Fund has launched a new fund of funds aimed at helping investors participate across market capitalisation segments through a structured allocation framework. The ICICI Prudential Diversified Equity All Cap Active Fund of Funds (FoF) opened for subscription on March 2, 2026, and will remain available for investment until March 16, 2026.

The open-ended scheme will predominantly invest in units of diversified domestic active equity-oriented mutual fund schemes spanning large-cap, mid-cap and small-cap segments. The fund will be benchmarked against the Nifty 500 Total Return Index (TRI), which represents the broader equity market across market capitalisations.

The objective of the scheme is to provide investors exposure to multiple market-cap strategies through a single investment vehicle while maintaining flexibility to shift allocations as market conditions evolve.

Structured allocation

According to ICICI Prudential AMC, the fund is designed to dynamically allocate capital across different market-cap categories based on an internal analytical framework. The strategy aims to combine flexibility with disciplined portfolio construction, enabling investors to participate across the equity market spectrum without having to actively shift allocations themselves.

Sankaran Naren, Executive Director and Chief Investment Officer at ICICI Prudential AMC, said investors often chase recent outperformers, which can lead to suboptimal outcomes.

“Over the past few years, we have seen phases of exuberance followed by corrections across market segments. Behavioural biases tend to drive investors toward recent outperformers, which often leads to suboptimal outcomes,” he said.

He added that the new fund seeks to address this challenge through a structured approach to market-cap allocation that can adapt to changing market dynamics.

All-cap exposure

The fund house noted that no single market-cap segment consistently outperforms across market cycles. Mid-cap and small-cap stocks tend to deliver sharper rallies during bullish phases but may also experience deeper corrections during market downturns.

By contrast, large-cap stocks typically provide greater stability during volatile periods.

As leadership rotates between large, mid and small caps across different market phases, an all-cap strategy can help investors maintain balanced exposure and reduce concentration risks.

The FoF structure will invest in a mix of diversified equity schemes including large-cap funds, large-and-mid-cap funds, mid-cap funds, small-cap funds, flexi-cap funds and multi-cap funds, thereby providing diversification across investment styles and strategies.

Investment framework

The investment process follows a structured, top-down framework that incorporates continuous monitoring of macroeconomic and market indicators.

Key parameters evaluated include growth trends, inflation dynamics, interest rate cycles, domestic demand conditions and global market developments. These insights help determine the relative attractiveness of different market-cap segments before allocating capital to underlying equity schemes.

The final portfolio allocations will be determined by the fund managers based on this internal framework and prevailing market conditions.

Why the fund launch now

According to the fund house, Indian equities delivered strong returns across market-cap segments until 2024, but valuations have moderated in recent months as market exuberance cooled.

At the same time, policy measures such as income tax cuts, GST reductions and a decline in interest rates are expected to support economic growth.

However, factors including geopolitical tensions, complex trade dynamics, volatile foreign institutional investor (FII) flows and uncertainty around global monetary policy could keep markets volatile in the near term.

In such an environment, schemes that offer flexibility to invest across market caps through a structured allocation framework may help investors navigate evolving market cycles more effectively.

The scheme will be managed by Dharmesh Kakkad and Sharmila D’silva, according to the fund house.

As with all mutual fund investments, investors are advised to consider market risks and review scheme-related documents before investing.

FoF mechanism

The Securities and Exchange Board of India (SEBI) has issued a new circular on the categorisation and rationalisation of mutual fund schemes, allowing asset management companies (AMCs) to launch fund of funds (FoF) structures that can invest in multiple underlying funds across defined categories.

Under the revised framework, FoFs have been classified into six broad categories and 15 sub-categories to streamline product offerings and improve clarity for investors.

The six broad categories include equity-oriented FoF, debt-oriented FoF, hybrid FoF (domestic), commodity-based FoF (domestic), overseas FoF, and domestic and overseas FoF.

SEBI has also permitted these FoF schemes to be launched under three investment approaches — active, passive, or a combination of active and passive strategies.