DWS Alpha Equity was known to be a middle-level performer for a major part of its life. It even had a dismal period of performance, but a new fund manager - Aniketh Inamdar - came in as a breath of fresh air and turned around the fortunes of the fund. And for quite some time now, the fund has made its presence felt by emerging as a category beater and shielding its investors in the market downturn as well.
The fund was launched in January 2003 with the aim to achieve capital appreciation by investing in equity and related securities across market capitalizations, but with a tilt towards large- and mid-caps.
For the first two years, the fund was a middle-0f-the-road performer and even saw a significant dip in 2005. However, things started to look better in 2006, with the fund delivering top quartile returns of 49 per cent, against the category's 33 per cent. In 2007 as well, the fund manager's timely sectoral moves helped it outperform the category with a decent margin of nearly seven per cent.
The fund manager increased the exposure in metals from four per cent in May 2007 to 10.17 per cent in January 2007, as he believed that the natural resources companies looked promising on the demand and supply basis and also felt that valuations at that time were not demanding if seen with this perspective. So, he picked up stocks like Tata Steel and Sterlite Industries. But he paired down the exposure from January seeing the impact on commodities prices on account of the global concerns of slowdown in the economic growth. Currently the allocation to this sector is four per cent. He also cut down significantly in computer software from 15 per cent in June 2007 to three per cent in September 2007. Seeing the choppy market conditions, he increased exposure to defensive sectors like consumer durables. Currently, energy is the most heavily invested sector at 18.56 per cent.
Despite a leeway to invest in mid-caps, the fund is rarely seen taking big bets in mid-caps and has always played safe with a strong large-cap bias. Aniketh Inamdar continued with this allocation and hence guarded its investors better than the average equity diversified fund in the recent market downturn (January 8, 2008 to October 10, 2008). Its fall of nearly 48 per cent was in line with its benchmark S&P CNX Nifty, while lower than category by five per cent.
All through its existence, the fund has seen massive and regular inflow and outflow of investors, which it has managed well enough with its small asset base and large-cap tilt. For instance, in January 2006, its assets dropped significantly by nearly 68 per cent despite it delivering nearly nine per cent during the month. On the other hand, in September 2006, they surged by 75 per cent while the rise in NAV was just five per cent.
The fund maintains a compact portfolio of nearly 32 stocks, with the top 10 holdings accounting for nearly half of the fund's portfolio. Currently, it has been lowered to 24 stocks from 33 stocks in December 2007. Although this makes it an aggressive bet, the risk gets partly mitigated by the large-cap bias.
This large-cap growth offering has emerged as a promising choice as it has outperformed its category in the long-run with an impressive margin of nearly 10 per cent by delivering an annualised return of 31 per cent as on September 30 over a period of five years.
In a nutshell, this one's all-round performance makes it a good pick.