Though a dividend-yield fund by mandate, this fund is classified as a multi-cap fund with 40-60 per cent allocation to large-cap stocks and the rest to mid- and small-caps. This fund has steadily gone up on the rating scale from a 1 star rating to a 5 star rating in 20 out of the last 24 months. Apart from a very strong show in the recent run, the fund has proved remarkably resilient during market falls, true to its defensive mandate.
Strategy: The fund invests in stocks across sectors and market caps that offer a minimum dividend yield of 0.5 per cent. In its initial years (2005 to 2008), the fund was overweight on mid-caps and delivered sub-par returns. But a change in the fund management in 2008 brought about a dramatic change in its fortunes. Since then, the fund has focused on quality stocks with high dividend yields. In the last one year, its large-cap allocation has gone up from below 50 per cent to over 60 per cent of assets. What was once a very concentrated portfolio has also been diversified in recent years. Though small-sized at `83 crore (end September, 2014), the fund held over 50 stocks in its latest portfolio.
The fund manager believes that it is companies that create wealth and not markets. 'We would not pay very high multiples for future growth and also would prefer companies that have a track record of consistently paying high dividends,' says the fund manager.
Performance: The fund has beaten its benchmark and category average every year since 2010. It has been particularly resilient to market downturns, expected of a defensive strategy. Over most trailing periods, the fund has consistently beaten its benchmark and other funds by a modest margin.
What we don't like: Finding high dividend yield stocks may get tough as market valuations rise, thus shrinking its investment universe.
Why invest? The fund's conservative mandate and focus on quality stocks makes it a good fund to ride out bumpy phases in the market cycle.
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