Sector investing can look enticing, but it is also easy to get it wrong. Investors often enter a sector/theme after it has already run up, and lose patience when the cycle turns.

ICICI Prudential Multi Sector Passive FoF (formerly known as ICICI Prudential Passive Strategy Fund) tries to solve this problem differently. It uses a fund-of-funds (FoF) structure to invest across passive domestic sector equity-oriented Exchange Traded Funds (ETFs). It changes allocations based on market cycles, valuations and macro signals. Historically, it has bought ETFs across different AMCs.

Though launched in December 2003, the scheme following SEBI’s implementation of MF categorisation and rationalisation in 2018 aligned under the “Fund of Funds (FoF) - Domestic” category and started investing in ETFs. In November 2025, following SEBI’s new rules for certain FoFs, the AMC-recategorised ICICI Pru Multi Sector Passive FoF into the ‘Equity Oriented FoF (Domestic) – Sectoral/Thematic FoF – Multi-Sector’ space and got its current name.

Over the years, the fund has delivered decent performance. Sector weights are decided through a structured, forward-looking process. The idea is to reduce the influence of emotion, recency bias and short-term market swings.

For investors who want sector exposure but do not want to chase headlines, this fund can work as a disciplined satellite allocation. The key is to treat it as long-term sector-rotation product, not as a replacement for a diversified equity fund. 

Strategy

ICICI Pru Multi Sector Passive FoF’s exposure to different sector ETFs is not fixed. It shifts exposure across sector ETFs depending on the economic backdrop and market signals. Growth, rates, inflation, earnings trends and valuations are tracked to assess whether the market is moving through recovery, expansion, late-cycle conditions or slowdown.

It aims to be dynamic across cycles. This would mean it can add cyclicals during early recovery and expansion (for example, Power), increase defensives during uncertainty or slowdown (IT, Pharma), trim overheated sectors where valuations exceed fundamentals.

Valuation is an important part of the fund’s allocation approach. The scheme looks for sectors where the potential upside appears attractive compared with the risks, rather than relying only on recent sector performance. It can also invest across sectors and market-cap segments.

Portfolio

As per its April 2026 portfolio, there seems to be a decisive tilt toward private banks, maintaining it as top allocation via the ICICI Pru Nifty Private Bank ETF. The fund appears to be strategically balancing this with defensive exposures across FMCG (10.6 per cent) and Pharma (9.6 per cent). Other tactical sector allocations include Oil and Gas, IT and Power.

Let us take a look some of the fund’s actions relative to overall sentiment in the recent months. The fund reduced its metals exposure from 9.8 per cent to 6.6 per cent between December 2025 and April 2026. In case of power, the fund increased its exposure from nil in October 2025 to 8.4 per cent in April 2026. Between November 2025 and April 2026, the fund reduced its broader Nifty Bank exposure from 14.8 per cent to below 6 per cent level, while simultaneously increasing its allocation to private banks from 19.2 per cent to 26.7 per cent. In case of pharma, the fund has built a substantial position, raising its exposure from nil in October 2025 to around 10 per cent in April 2026. In case of IT, from a high of 13.8 per cent in November 2025, the fund has cut exposure to 8.6 per cent in April 2026.

Shedding fragmented thematic clutter like the consumption and infrastructure ETFs, the fund appears to have transitioned into a leaner, high-conviction sectoral framework over the last 12 months.

Performance

The scheme demonstrates consistent alpha generation over Nifty 50 - TRI, across all key trailing horizons. Over a volatile one-year period, the fund delivered a positive return of 2.6 per cent against the benchmark’s -4 per cent decline, highlighting downside cushion. This outperformance widens significantly over medium-to-long horizons, with the fund outpacing the index by 520 bps, 350 bps and 220 bps over the 3-year, 5-year and 7-year periods, respectively.

Its outperformance is further seen by looking at rolling returns data calculated since the May 2018 recategorisation excercise. The fund’s three-year and five-year rolling median returns stand robust at 17.3 per cent and 17.2 per cent, comfortably beating Nifty 50 TRI. Even on a long-term seven-year rolling basis, the fund holds a superior median of 14.4 per cent while maintaining higher minimum return thresholds. This may be taken as a signal that its strategy adds value over passive broad-market index tracking.

The fund’s risk ratios over the 2023-26 reveal high-quality risk-adjusted performance profile. It achieved decent outperformance while maintaining a low beta of 0.85 relative to the benchmark. A high R-squared of 0.95 confirms that a majority of its returns are explained by systematic market factors. Risk-adjusted return metrics are strong, led by a Sharpe ratio of 0.29 and a Sortino ratio of 0.53, indicating good downside risk management. The fund captured an impressive 91.1 per cent of market gains during upswings, while successfully restricting its participation to just 75.6 per cent during market downturns. Data for ratios is sourced from ACEMF.

Takeaways

In the sector rotation niche, ICICI Prudential Multi Sector Passive FoF has one clear edge: track record. JioBlackRock (launched 2026) and Shriram’s (launched 2024) sector-rotation offerings are still new, while ICICI Pru’s record is tested across cycles.

Costs need watching. The FoF expense ratio is 0.4 per cent for regular and 0.2 per cent for direct plans, and underlying ETF costs make it layered. Still, NAV returns are after costs, and performance has remained decent so far.

Note that sector timing risk will not vanish. The fund’s calls can be early, late or wrong, and there will be phases when a plain Nifty 50 or flexi-cap fund does better. Still, this is safer than picking individual sector stocks. Use SIPs, keep a five-seven year horizon.

Published on June 6, 2026