The Hindu Business Line : Alliance Equity: Invest

AN investment can be considered in Alliance Equity Fund, as its portfolio appears well positioned on themes that can deliver value. It was among the several funds that delivered returns of over 100 per cent in 2003.

This has been followed by a gain of close to 50 per cent in a volatile year in 2004. The sector preferences and stock selection in the mid-cap space are principal factors that have contributed to the good showing.

The fund has a long-term track record that inspires confidence despite its difficulties after the meltdown in information technology stocks in 2000. Its portfolio was then heavily skewed towards IT sector stocks. The exit, last year, of Mr Samir Arora, the Chief Investment Officer in controversial circumstances also had a bearing on performance and the asset base. The fund has managed the transition smoothly as the hefty gains in NAV over the past two years indicate.

Alliance Equity has comfortably outperformed the broad market indices as well as several peer funds. Sporting annual returns of about 50 per cent over the past three years, and about 40 per cent since its launch in 1998, the fund could be considered to complement a portfolio of funds. Investors could, however, invest in small lots through the systematic investment plan. This would enable them to take advantage of any price weakness in equities.

Suitability: Alliance Equity is appropriate for investors with a penchant for higher risk, as the fund management style tends to be aggressive. It has delivered returns that compensate investors for the higher risk element. Investors may opt for the dividend plan due to superior tax efficiency, as payments are exempt from tax. The Alliance funds are set to move to the Birla SunLife Mutual Fund fold. In our view, this development may affect the performance.

Portfolio overview: Pharmaceuticals, oil and telecom are the preferred sectors. These account for just 26 per cent of assets. The exposures in Bharti Tele-Ventures, Trent, Infosys, Siemens and Container Corporation and Hindalco, which delivered handsome gains, could provide a further impetus to performance as business growth prospects for these companies appears to be bright.

Now at about Rs 250 crore, the asset base provides for a high degree of flexibility in fund management. The fund has a compact portfolio that ensures that each stock selection has the scope to make a difference to performance.

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