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Tiny But Impressive

ING Dividend Yield's small assets enable the fund manager to churn in impressive returns…

Strategy
The aim of the fund is to invest in stocks which offer a high dividend yield. This fund deploys a value based strategy which aims to gain from investing in fundamentally strong and free cash flow generating businesses.
The scheme focuses not only on growth but also on the cash generated by the business, which mostly leads to stable returns even in volatile markets. This fund has a low volatility because of its investment in high yielding stocks. The scheme tries to include stocks that yield dividend above the dividend yield of the Nifty and stocks with liquidity, which throws up a universe of 150 stocks.

Our View
Launched in October 2005, this fund invests at least 65 per cent of its assets in high dividend yield stocks. The fund has consistently maintained a mix of stocks across varying market capitalisation, with a higher tilt to mid caps compared to small caps. However, the December 2010 portfolio indicates a move towards large caps. Since it focuses on mid- and small-cap stocks, its small asset size is a significant advantage. With assets amounting to less than Rs50 crore, the fund manager is in a position to deftly move in and out of stocks and sectors and even take substantial bets in them. But in reality he tilts towards a buy-and-hold strategy, which has helped the fund gain handsomely and emerge as a top performer.

The Verdict
The fund has been improving its performance with each passing year since its launch. When compared with other dividend yield funds in this category, it made a mark in 2009 with a return of 105 per cent, the prime reason being the tilt towards smaller cap stocks, which had triggered the rally. Compared to the Mid & Small Cap category, it has been a first or second quartile performer.

Portfolio Insight
• The top 3 sectors are Financial Services, Technology and Energy. They account for half the equity portfolio allocation.
• Despite a small asset base, the fund is well diversified with around 34 stocks where allocation to a single stock has not gone beyond 4 per cent.
• Select stocks such as Tata Steel, Coromandel International and Tata Chemicals, which sported low PEs in mid-2009, have turned out to be multi-baggers over the past year.
• Micro Inks, NIIT Technologies, Bharati Shipyard and Oriental Bank of Commerce were some of the stock picks that helped it deliver 105 per cent in 2009.