The early years were the best for Alliance '95. In 1998, the fund topped its category by posting a 51 per cent return. At that point, two-third of Alliance's portfolio was invested in equities, mainly technology, fast moving consumer goods and healthcare sectors. The fund increased its technology exposure in 1999 and by year-end 40 per cent of its portfolio comprised technology stocks. The tech rally in 1999 helped the fund gain a massive 180 per cent, and Alliance '95 outperformed many of its diversified equity peers.
In 2000 too, the fund remained predominantly invested in technology stocks. When the bull run finally came to a halt, tech stocks still accounted for nearly half of Alliance '95 portfolio. This portfolio consisted mostly of large-cap tech stocks. This helped the fund limit the downside and it lost less than its peers, ending the year at third place. Overall, even 2000 was not a bad year for Alliance '95.
In the next two years, the fund underperformed the category. Large holdings in technology especially in the early part of 2001 proved quite costly. When stock markets fell after the Budget in 2001 technology stocks took a beating. The fund still had a third of its portfolio in technology and its NAV fell faster than that of other category players. The stock market rally post-9/11 was led by technology stocks initially and then public sector stocks. A significant concentration in technology in the portfolio helped Alliance '95 join the rally. Despite the year-end recovery, the fund ended the year down 14 per cent.
In 2002, the opportunities lay again in PSU stocks. Within this, oil and gas and bank stocks performed exceptionally well. Since the fund had small positions in both these sectors, its returns were significantly less than that of the category winners. Till date, Alliance '95 remains a fund with high-technology exposure amongst its peers. The fund has not been afraid to take higher risks in the debt portfolio either. This is evident from its considerable exposure to gilts as well as AA-rated paper in the past two years.
Overall, Alliance '95 has definitely slowed down. However, investors should keep the faith. In a bullish market, this fund can still deliver.