The asset manager for a changing world
The asset manager for a changing world


NFO Period: 14th to 28th February 2019


NFO Period: 14th to 28th February 2019

  • Equity markets are volatile by nature and yet it is an asset class that helps in wealth creation over long periods of time.
  • One of the ways which can help reduce volatility can be through a dynamic asset allocation strategy executed through a model based approach (eg: reducing equity exposure at higher market valuations) while managing the risk profile of the overall portfolio.
  • A dynamic asset allocation strategy tends to offer lower volatility by taking opportune bites into the equity market in times of volatility and at the same time offer possible reasonable upside participation.

  • Equity allocation model based on trailing price-earnings ratio (PE) of Nifty 50 index (monthly median PE value) and a monthly portfolio rebalancing.
  • The endeavour was to increase exposure to equities at lower market valuations. Conversely at higher market valuations, the allocation to equities was reduced and moved in to equity arbitrage and fixed income instruments.
  • Arbitrage allocation was used to maintain net asset exposure towards equity related instruments to take advantage of the pricing differential or arbitrage between stocks traded in the cash and derivatives segments to generate returns.
Indicative Guideline For Asset Allocation Ranges
PE BandEquity Allocation RangeArbitrage AllocationDebt Allocation
Below 12.595-100%0%0-5%
12.5 15.0 85-95% 0-15% 0-15%
15.0 17.5 75-85% 0-25% 0-25%
17.5 20.0 65-75% 0-35% 0-35%
20.0 22.5 55-65% 0-35% 0-35%
22.5 25.0 45-55% 10-35% 0-35%
25 and above25-45%20-40% 0-35%

Std. Dev. = Standard Deviation annualized for the stated period.
Data Source:Bloomberg, AMFI. Data as on Dec 31, 2018. Computation:BNPPAMC
The above graph is only an illustration for the working of the Model explained above. The back test (simulated) results contained in this document are hypothetical results and do not reflect actual investments. The investments and allocations assumed during the back test were not actually executed – they are only simulations. These back test simulations cannot reflect all of the complexities of actual investment and there are many material factors that could have affected actual results. The performance results do not reflect the deduction of investment management fees, mutual fund fees, or any other fees and expenses. Also not included in the results are the reinvestment of dividends and all other earnings. The past index performance and simulated performance indicated herein is no guarantee of future results and there is no assurance that these past performances will be repeated for the scheme, and investors should understand that their principal will at high risk.

Return Period Model CRISIL Hybrid 35+65 - Aggressive Index Alpha over Crisil Benchmark Nifty 50 Market Trend
Oct 05 to Jan 08 40.30% 33.30% 7.00% 46.90% Upward trend
Jan 08 to Oct 08 -48.80% -46.00% -2.80% -59.90% Sharp decline
Oct 08 to Nov 10 35.80% 42.40% -6.60% 57.10% Sharp rise
Nov 10 to Dec 11 -12.30% -16.80% 4.50% -25.50% Decline
Dec 11 to Mar 15 26.10% 20.60% 5.50% 23.80% Range bound
Mar 15 to Feb 16 -8.40% -11.00% 2.60% -22.00% Decline
Feb 16 to Aug 18 14.30% 19.10% -4.80% 22.70% Upward trend
Absolute returns for period up to 1 year and annualized for period greater than 1 year.
Source:Bloomberg, AMFI. Computation:BNPPAMC, Data for the period Oct 2005 to Dec 2018.
The above table is only an illustration for the working of the Model explained above. The back test (simulated) results contained in this document are hypothetical results and do not reflect actual investments. The investments and allocations assumed during the back test were not actually executed – they are only simulations. These back test simulations cannot reflect all of the complexities of actual investment and there are many material factors that could have affected actual results. The performance results do not reflect the deduction of investment management fees, mutual fund fees, or any other fees and expenses. Also not included in the results are the reinvestment of dividends and all other earnings. The past index performance and simulated performance indicated herein is no guarantee of future results and there is no assurance that these past performances will be repeated for the scheme, and investors should understand that their principal will at high risk.


Dynamic Asset Allocator
  • Fund intends to dynamically allocate assets between equity, cash future arbitrage / equity derivatives, and debt and/or money market instruments.
  • Aims to manage volatility in response to changing market conditions.

Price To Earnings (PE) Ratio Based Approach
  • The endeavor is to increase exposure to equities when market appears cheaper (lower PE). Conversely when market becomes expensive (higher PE) Scheme to reduce its equity exposure and allocate it to equity arbitrage and fixed income instruments.
  • Portfolio may be rebalanced monthly depending upon the trailing PE levels of Nifty Index^.

Equity And Equity Related Instrument Orientation
  • Portfolio intends to maintain at least 65% of net asset exposure to equity and equity related instruments at all points in time thus offering equity taxation*.
  • Diversified portfolio investing across sectors and market capitalization.
  • Along with direct equity the fund will allocate remainder portion to arbitrage opportunities generated from pricing differential between stocks traded in the cash and derivatives segments.
  • Remaining allocation to money market and other fixed income securities will be decided after considering the economic environment, sector performance, general liquidity, etc. in the economy and markets.


Scheme Name:
BNP Paribas Dynamic Equity Fund (An Open ended Dynamic Asset Allocation fund)


Category:
Dynamic Asset Allocation


Investment Objective:
The primary investment objective of the Scheme is to provide capital appreciation by dynamically managing the portfolio of equity and equity related instruments (including arbitrage exposure), and fixed income instruments.
However, there can be no assurance that the investment objectives of the Scheme will be realized. The Scheme does not guarantee/indicate any returns.


Asset Allocation:
Equity & equity related instruments including derivatives: 65-100%. Debt instruments & Money Market Instruments (including cash and money at call): 0-35%.
Units issued by REITs & InvITs: 0-10%


Benchmark:
CRISIL Hybrid 35+65 - Aggressive Index


NFO Period:
NFO Opens: Thursday, February 14, 2019, NFO Closes: Thursday, February 28, 2019. Re-Opens: Within 5 business days from date of allotment.
Offer of units of Rs.10 each during the New Fund Offer Period and continuous offer for units at NAV based prices.


Fund Manager:
Mr. Karthikraj Lakshmanan & Mr. Abhijeet Dey (for equity portion) and Mr. Mayank Prakash (for debt portion)


Load Structure:
Entry Load: Nil. Exit Load: • If units redeemed or switched out up to 10% of the units (the limit) within 12 months - Nil. • If units redeemed or switched out in excess of the limit within 12 months - 1%. •If units redeemed or switched out after 12 months - Nil


Plans and Options:
Regular Plan and Direct Plan. Available options in each Plan: Growth, Monthly Dividend, Quarterly Dividend and Annual Dividend Option.
The dividend options shall have dividend payout and dividend reinvestment facilities. There shall be a single portfolio under the Scheme.


Minimum Application Amount during NFO and Ongoing offer period:
Lumpsum investment: Rs. 5,000 and in multiples of Re. 1 thereafter. Additional Purchase: Rs. 1,000 and in multiples of Re.1 thereafter
SIP: (i) Daily, Weekly, Monthly SIP: Rs. 300/- and in multiples of Re. 1/- thereafter; (ii) Quarterly SIP: Rs. 1000/- and in multiples of Re. 1/- thereafter.


BNP Paribas Dynamic Equity Fund

(An Open ended Dynamic Asset Allocation Fund)

This product is suitable for investors who are seeking*:
▶ Wealth creation in long term.
▶ Investments in a dynamically managed portfolio of equity and equity related instruments (including arbitrage exposure), and fixed income instruments.
* Investors should consult their financial advisers if in doubt about whether the product is suitable for them.


^Investors should note that the allocations based on PE model are indicative only and not binding on the Fund Manager. The Fund Manager retains the right to deviate from these allocation levels where it believes this is in the best interests of investors in the Fund, taking into account the market conditions and opportunities, applicable regulations and politico economic factors.
*The information on taxation is provided for only general information purposes, based on the Mutual Fund’s understanding of such tax laws in force as guided by the tax consultants. Investors are requested to note that fiscal laws may change from time to time and there can be no guarantee that the current tax position may continue in the future. Investors are advised to consult their tax advisor in view of individual nature of tax implication. Please refer below for the risk factors associated with investments by scheme in equity, debt and arbitrage.

Risk Factors: The scheme aims to actively manage equity and debt exposure in the portfolio based on the detailed historical analysis done by the fund manager. We are of the belief that such strategy will minimize the risk and optimize the risk return proposition for a long term investor. However there is no certainty that this active asset allocation approach will be able to deliver the results as tested. The underlying assumptions of the model on the correlation between the three asset classes (i.e. equity, debt and arbitrage) might not hold true at all points in time which might impact the returns.
Further, the risks associated with investments in equities include fluctuations in prices, as stock markets can be volatile and decline in response to political, regulatory, economic, market and stock-specific development etc. The Scheme may pursue only a limited degree of diversification as it may invest in a limited number of equity and equity related securities or invest a greater proportion of assets in the securities of very few issuers (within the limits permitted by regulation) or be concentrated on a few market sectors as compared to a diversified scheme. The Scheme is also expected to have higher market liquidity risk on account of concentration. This could have implications on the performance of the Scheme. The scheme may be more sensitive to economic, business, political or other changes and this may lead to sizeable fluctuation in the Net Asset Value of the scheme.
Further, to the extent the scheme invests in fixed income securities, the Scheme shall be subject to various risks associated with investments in Fixed Income Securities such as Credit and Counterparty risk, Liquidity risk, Market risk, Interest Rate risk & Re-investment risk etc., Further, the Scheme may use various permitted derivative instruments and techniques (including arbitrage strategy) which may increase the volatility of scheme’s performance. Risk factors associated with arbitrage strategy: On the date of expiry, when the arbitrage is to be unwound, there could be a discrepancy in the stock price and its future contract price even a minute before the market closes and hence, a possibility that the arbitrage strategy gets unwound at different prices. While reversing the spot-futures transaction on the Futures & Options settlement day on the Exchange, there could be a risk of volume-weighted-average-price of the market being different from the price at which the actual reversal is processed. This may result in basis risk. Further, the risks associated with the use of derivatives are different from or possibly greater than, the risks associated with investing directly in securities and other traditional investments.

Please refer to Scheme Information Document available on our website (www.bnpparibasmf.in) for detailed Risk Factors, assets allocation, investment strategy etc.

Disclaimers: The material contained herein has been obtained from publicly available information, internally developed data and other sources believed to be reliable, but BNP Paribas Asset Management India Private Limited (BNPPAMC) makes no representation that it is accurate or complete. BNPPAMC has no obligation to tell the recipient when opinions or information given herein change. It has been prepared without regard to the individual financial circumstances and objectives of persons who receive it. This information is meant for general reading purpose only and is not meant to serve as a professional guide for the readers. Except for the historical information contained herein, statements in this publication, which contain words or phrases such as 'will', 'would', etc., and similar expressions or variations of such expressions may constitute 'forward-looking statements'. These forward looking statements involve a number of risks, uncertainties and other factors that could cause actual results to differ materially from those suggested by the forward-looking statements. BNPPAMC undertakes no obligation to update forward-looking statements to reflect events or circumstances after the date thereof. The words like believe/belief are independent perception of the Fund Manager and do not construe as opinion or advise. This information is not intended to be an offer to sell or a solicitation for the purchase or sale of any financial product or instrument. The information should not be construed as an investment advice and investors are requested to consult their investment advisor and arrive at an informed investment decision before making any investments. The Trustee, AMC, Mutual Fund, their directors, officers or their employees shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages arising out of the information contained in this document.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

BNP Paribas Asset Management India PVT. LTD.
Regd. Off.: BNP Paribas House, 1 North Avenue, Maker Maxity, Bandra Kurla Complex, Bandra (East), Mumbai - 400051 - India. | Email: customer.care@bnpparibasmf.in | Corporate Identity Number (CIN): U65991MH2003PTC142972 | Call us @ 1800 102 2595 | Invest online @ www.bnpparibasmf.in