This fund is a large-cap growth category elite. Take a look at Alliance Equity's total return of 30.26%, which is miles ahead of its peers. Fund manager Samir Arora's record of success has helped investors keep the faith in this 5-star fund.
Though Alliance Equity is spread across 51 holdings, its top 10 large-caps account for a huge portion of the assets. The remaining 41 stocks are an apology for holdings. While the fund's returns are largely impacted by the performance of its top holdings, it isn't so vulnerable to other stocks floundering, allowing it to experiment with certain stocks. While picking Mascon Global, for instance, helped the fund garner considerable returns others like Excel Industries -- which was held for a long time -- were a disappointment.
It was Arora's aggressive mien that enabled this largest private sector open-end equity fund (Rs 459.21 crore) turn in superior returns in 1999. Its asset base almost doubled to Rs 522 crore in the last quarter of 1999. But in 2001, the fund's fetish for tech stocks was at odd with valuations of its favourite pick. It remained overweight in technology despite falling valuations. Probably the fund's buy and hold strategy marred its returns. As a result, it landed in the bottom quartile in 2001 (rank: 41/51). Incidentally, the same aggressive stance had paid off well for the fund in 2000, when its returns were way above the average peer's.
Currently, the fund's portfolio looks more broad-based. Most large funds (over Rs 500 crore in size) will resemble an index fund as this is the only way a big fund can be managed efficiently. The fund's current sectoral exposure matches the Nifty, with few exceptions. Alliance equity is overweight in auto and services and underweight in FMCG and diversified sectors. In isolation, the fund's tech exposure seems to be high but in comparison to Nifty's tech allocation of 25%, it isn't so alarming.
Overall, experienced management and ability to shine during a bull run make Alliance Equity a keeper for the assertive types.
This article was originally published on June 19, 2002.
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