Fund of Fortnight

Reason for recommendation

BNP Paribas Substantial Equity Hybrid Fund - Direct Plan (Growth)


The year 2020 may turn out to be a good year for investors in terms of both, equity and debt. After couple of years of underperformance, the broader markets may be ready for gain in the upcoming year. Moreover, the unexpected move by RBI to correct the steepening of the yield curve through US Fed Reserve style ‘operation twist’ will lead to rally in the bond prices. In such case, it makes sense to invest in a fund that invests in both equity and debt.

Therefore, our pick for the fortnight is an aggressive fund, BNP Paribas Substantial Equity Hybrid Fund. This fund has generated a return of more than 16 per cent in the last one year, which is better than its benchmark and category and even most of the equity dedicated funds. As of November 30, the fund held 75 per cent of its assets in equity, 13.1 per cent in cash, and rest in debt. Even in equity, the fund has major exposure to large cap stocks. What is good about this young fund is that it is holding 13 per cent in cash, which it can easily deploy in equity, once the opportunity is spotted. Even in its debt exposure, most of the fund is invested in AAA-rated or AA-rated papers. 

Going ahead, the presence of some of the strong and large private sector banks, such as HDFC Bank and ICICI Bank, with higher weightage in the portfolio, are likely to generate better returns for the fund. Moreover, the normalisation of the yield curve will help the debt portion of the fund to perform. Hence, this fund is better suited for a moderate risk taking investor with investment horizon of at least three years.