This fund is on a comeback trail. After remaining in the bottom half of the category for long, Alliance New Millenium has beaten nearly all its peers in the past one-and-a-half years. A greater focus on mid-caps and some good stock selection has been the key to the fund's turnaround story.
One of the basic things that separate Alliance New Millenium from other tech funds is that it always plays a concentrated bet. In the past one-year, the fund's top-five holdings have accounted for an average 78 per cent of the portfolio. And in fact, this was the main reason for the fund's superlative performance in 2003 - up 67 per cent vis-à-vis category average of 54 per cent. The fund's top picks like Bharti-Televentures and E-Serve International together accounted for over one-third of the portfolio. And as the share prices of these two zoomed in 2003, the fund ended up with healthy returns that year.
Alliance New Millenium has continued with this duo-stock combination in 2004 as well. However, as the rally has faded, the fund is currently down 10.75 per cent in the first six months of 2004, which is in line with the category average.
Mid-caps have been the fund's favourite. Almost two-third of Alliance New Millenium's portfolio comprises of mid- and small-cap stocks. These include E-Serve International, Mphasis BFL, Hinduja TMT, Geodesic Information Systems. Among these except for Mphasis BFL all others have made smart gains thus boosting Alliance New Millenium's return. That apart, the fund has been unlucky with one of the mid-caps - Visualsoft Technologies - it was sold at a 50 per cent loss in May 2004. Owing to these ups and downs in mid-caps, the fund's standard deviation (a measure of volatility) is on the higher side in the category.
This, however, does not mean that the fund has totally ignored large-cap investments. Infosys has always been a part of Alliance New Millenium and is holding Bharti-Televentures since its listing in February 2003. But other large-caps like Satyam and HCL Technologies has moved in and out of the fund's portfolio quite frequently. Interestingly, the fund has not invested in Wipro since December 2001.
Investors willing to take higher risk in order to earn higher return over the long-term could look forward to Alliance New Millenium. And the existing investors can hold on for some more time owing to improving picture of the technology sector.