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Investors can buy units of BNP Paribas Dividend Yield Fund (BNP Dividend), given its long-term record in delivering steady returns. Over one-, three- and five-year time-frames, the fund has beaten its benchmark – BSE Sensex. BNP Dividend has delivered a compounded annual return of 12.1 per cent over the last five years, which places it among the mid-quartile of funds in the diversified category.
The fund has been able to participate in market upswings and has contained NAV slides . In the 2007 as well as the 2009-10 market rallies, the fund delivered 4-7 percentage points more than its benchmark and checked downsides better than the Sensex. In the 2008-09 fall, for instance, it surpassed the Sensex by about 7 percentage points. Even in the volatile markets over the past 8-10 months, BNP Dividend has contained the slide in NAV better than its benchmark.
The fund has seen substantial improvement in performance over a three-year period when it delivered 19 per cent compounded annual returns, placing it among the top two funds in the dividend yield category. Given that the fund does take exposure to mid-cap stocks, the risk associated is higher than pure large-cap funds. Investors may park small amounts as investment.
Portfolio and strategy : BNP Dividend, though benchmarked to the Sensex, takes significant exposure to mid-cap stocks (less than Rs 7,500-crore market capitalisation). But over the last year, the fund has reduced exposure from 46 per cent of the portfolio to around 30 per cent currently.
By moving to cash and equivalents, sometimes in excess of 20 per cent, the fund has been able to contain downsides significantly. The fund has reduced exposure to banks and sharpened its focus on consumer non-durables.
Capital goods stocks have been assigned low weights, while petroleum products figure among the top few sectors. While dividend yield sectors rule the roost, in line with its mandate, the fund's portfolio suggests active churning of underperformers, with defensive or value picks. But being a fund with low assets under management, such active churning may result in higher impact costs.
The fund generally has around 35 stocks in its portfolio and refrains from taking concentrated bets.
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