Dynamic Asset Allocation: ICICI Prudential Mutual Fund Launches Passive FOF to Switch Between Equity and Debt

ICICI Prudential Mutual Fund has launched the ICICI Prudential Dynamic Asset Allocation Passive FOF, an open-ended fund of funds scheme that will dynamically invest in units of passive equity and debt-oriented schemes. The New Fund Offer (NFO) opened on August 26, 2026, and will remain open for subscription until September 9, 2026.

Model-Based Equity and Debt Allocation

The scheme is designed to address the challenge investors face in deciding when to increase or reduce equity exposure, select suitable schemes and reposition portfolios through changing interest-rate cycles. The fund will use a defined investment framework to manage allocation between equity and debt within a single scheme.

According to ICICI Prudential AMC, the fund's approach is built around the acronym "ACTS", which stands for allocating across equity and debt, capitalising on opportunities across market-cap, sector, thematic and factor-based passive strategies, Tax-efficient rebalancing within the scheme, and sizing allocations through defined weights across selected strategies.

Equity Allocation Guided by Valuation Framework

The equity-debt allocation will be guided by the fund house's in-house Equity Valuation Index (EVI). The model considers parameters including price-to-earnings, price-to-book, G-Sec-adjusted earnings and market capitalisation relative to GDP.

As of July 31, 2026, the EVI stood at 105.2, which was within the model's neutral zone. The fund can invest across market-cap, sector and thematic as well as factor-based passive funds on the equity side.

Debt Allocation to Track Interest-Rate Cycles

On the debt side, the scheme can invest in target-maturity, constant-duration and constant-maturity Index Funds and ETFs. Duration positioning will be influenced by factors including interest-rate trends, RBI policy expectations, the shape of the yield curve and growth expectations.
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The fund house said that the model-based approach is intended to reduce the need for investors to independently time the market or switch between different funds as market conditions change.

Rebalancing Within the Scheme

One of the features highlighted by ICICI Prudential Mutual Fund is that allocation changes within the scheme do not trigger an investor-level tax event each time the portfolio is rebalanced.

Instead, changes between the underlying equity and debt allocations take place within the scheme. This means investors do not need to independently redeem one fund and invest in another whenever the allocation changes.

Chintan Haria, Principal - Investment Strategy at ICICI Prudential AMC, said the scheme is designed to simplify investment decisions by using a valuation framework to guide equity-debt allocation and passive funds to implement the strategy across different market segments.

Scheme Details

The NFO period is from August 26 to September 9, 2026. The scheme will be available under Direct and Regular Plans with the Growth option.

The minimum application amount during the NFO is Rs 1,000, in multiples of Rs 1. The minimum additional application amount is also Rs 1,000, while the minimum redemption amount can be any amount. SIP, SWP and STP facilities are available.

The scheme has an exit load of nil on up to 30 per cent of units redeemed or switched out within one year of allotment. A 1 per cent exit load applies to units redeemed or switched out beyond that limit within 12 months, while the exit load is nil after 12 months.

The fund managers are Manan Tijoriwala, Sharmila D'Silva, Manish Banthia, Ritesh Lunawat and Nishit Patel. The benchmark is the CRISIL Hybrid 50+50 – Moderate Index.

Taxation and Risk Considerations

According to the scheme details, taxation is stated as the slab rate for a holding period of less than 24 months and 12.5 per cent for a holding period of 24 months or more.

The fund house has also cautioned that investors will bear the recurring expenses of the scheme in addition to the expenses of the underlying schemes in which the fund of funds invests. Mutual fund investments are subject to market risks, and investors are advised to read the scheme-related documents carefully.

With its valuation-based allocation framework, access to multiple passive equity and debt categories and in-scheme rebalancing mechanism, the ICICI Prudential Dynamic Asset Allocation Passive FOF is positioned as a single-scheme approach for investors seeking dynamic exposure across asset classes and market cycles. The NFO remains open until September 9, 2026.

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Disclaimer: The article is for informational purposes only and not investment advice.