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S. Vaidya Nathan

AN INVESTMENT may be considered in Deutsche Alpha Equity Fund, as it provides quality exposure to large-cap stocks. The fund has a fairly impressive track record when compared to benchmark indices such as Nifty and Sensex as well as peer large-cap funds. It has also managed the choppy trends in equities in 2005 well with limited damage to the Net Asset Value. Funds that have a focus on large-cap stocks and an impressive track record such as Franklin Bluechip, Templeton India Equity, Reliance Vision, HDFC Equity and HSBC Equity, to name a few, now have an asset base that is comfortably in excess of Rs 1,000 crore. In contrast, Deutsche Alpha Equity has not attracted much attention, as is evident from its small asset base of about Rs 60 crore at the end of April. The performance of some of the large-asset-base funds has started to slacken in recent quarters. For instance, in the first quarter of 2005, barring Reliance Growth and Reliance Vision, Deutsche Alpha Equity has performed better than other funds with a tilt towards large-cap stocks; the fund had managed to stay in line with the trends in the Nifty. Over the past one year, the NAV has risen by 22 per cent outpacing the Nifty by 7 percentage points. Annual returns since its launch in January 2003 has been about 50 per cent. During this period, it enjoyed a bullish market for about 18 months and a flat and choppy market over the past year. It has missed out on the action in the mid-cap space where returns have been far higher than in large-cap stocks. It has about 15 per cent of its assets in mid-cap stocks now. This could pep returns by a few percentage points. The small asset base could prove to be a significant positive as it provides the fund considerable flexibility in management. As it focuses mostly on large-cap stocks, it should be well placed to enter and exit stocks without suffering too such by way of impact costs. The preferred sectors are IT, banking, and steel, as well as companies with a diversified business profile; stocks from these four sectors account for about 50 per cent of assets.

Suitability: The risk associated with the fund is in line with typical diversified equity funds.

It is aggressively managed and has generated returns that have compensated investors for the risk levels.

We would not, however, recommend this fund to be the core of your of portfolio of funds; you could invest between 10-15 per cent of your assets in this fund.

Investors could opt for the Dividend Re-investment option, as it would ensure that they take advantage of the tax exemption and also remain invested.

Fund Facts: The minimum investment amount is Rs 5,000.

The entry load is 2.25 per cent. There is no exit load. The fund's benchmark is the Nifty.

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