Alliance Capital has launched a new MIP, Alliance Monthly Income-Debt. The new fund will be fully invested in bonds. Hence, the fund will closely resemble an open-end bond fund with a portfolio focus to provide regular dividend. All investors of Alliance MIP will be allowed to switch over to Alliance MIP – Debt without any load.
Alliance Capital was the first to launch the open-end MIP with an equity allocation in July 1999. Alliance MIP has emerged as the largest among 8 open-end MIPs with total asset of Rs 450 crore as on December 31, 2001. In its initial phase, the fund gave stellar returns with a booming equity market. However, in tough market for equities, the fund trimmed its equity allocation to maintain dividend consistency, but stuck to a minimum 5 per cent equity allocation all through. While most other new MIPs were totally out of equities, despite a mandate to have a marginal equity allocation.
The rationale for the new fund is to retain the existing profile of Alliance MIP. Except for the branding, the new fund's portfolio will be like its medium-term debt fund -- Alliance Income, but with a portfolio focus to earn higher interest income. And the novelty will be the monthly dividend from an all bond fund.
Nikhil Johari, CEO, Alliance Capital on the all debt and little equity variants of Alliance MIP
On the need to launch Alliance Monthly Income – Debt
It is not mandatory that MIPs necessarily have an equity component. The equity component makes returns from such a fund very volatile and hence investors, who expect a consistent dividend at the end of every month, do not prefer such funds. It is only for such investors that we are introducing a bond option in which the returns are not expected to be very volatile.
On the likely exposure to equities in the existing Alliance MIP and the ideal time frame for an investor in Alliance MIP
During the existence of our MIP scheme, we have kept the range of equity investment between 3% to 10% approx. The ideal timeframe for an investor is approximately three years.
On investment strategy for MIP's bond option. How different will it be from Alliance Income Fund (AIF)?
The MIP bond option will differ from Alliance Income Fund (AIF) mainly with respect to the additional exposure to liquid government securities in MIP and it is essential to realise profits before declaring dividend. The portfolio duration of Alliance MIP bond option will be very similar to AIF. Investment Details.
Issue opens : January 07, 2001 Issue closes : January 11, 2001 Minimum Investment : Rs. 5000 Entry Load : Nil Exit load : 1 percent Investment Plans : Quarterly and Monthly Dividend, Growth