BNP Paribas Dividend Yield Fund

Investment Objective

The scheme aims to generate long term capital growth from an actively managed portfolio of equity and equity related securities, primarily high dividend yield stocks. High dividend yield stocks are defined as stocks of companies that have a dividend yield in excess of 0.50 per cent.

Analysis

Over the last five years, this fund has built up an enviable track record for providing a generally better track record of producing returns when the equity markets are booming and protecting those returns when they are slumping. After an iffy start, its track record has improved, first gradually and then, post 2009, quite sharply.

The results can be clearly seen in the fund's Value Research Star Ratings. It's lifetime average rating is 3.6 stars, while it's rating over the last 12 months is 4.9. In fact, over the last 22 months, only twice has it scored four stars; the rest of the months have all been five star. This outstanding record is backed by seven straight years of beating the benchmark.

After October 2007, this fund has never lagged the benchmark. Over this period, it has gained a total of 55 per cent over the benchmark, which translates to 7 per cent per annum. As relative returns go, this is a most impressive number. As the fund has very recently changed its benchmark from the BSE Sensex to the CNX200, these long-term comparisons are based on the former index.

In terms of its portfolio construction, the fund has generally stuck closely to that of the category. This means that about half the assets are in large cap stocks, 20 to 30 per cent in mid-caps and the rest in smaller companies. However, this pattern has been broken since May 2013, when it has sharply turned towards large-cap stocks, but hasn't lessened its small cap exposure.

As the name indicates, the fund is designed as a dividend yield fund and not a multi-cap fund. However, given the diverse characteristics of companies that tend to have high dividend yields, it is effectively in that category. The mandate is to identify the best companies with high dividend yield stocks with a dividend yield in excess of 0.5 per cent, across the markets caps. We do not have portfolio limits for market caps. However, we are always conscious that the portfolio should be well diversified across sectors.