There are no half measures for Alliance MIP. A peep into its past shows that the fund rarely fails to capitalise on market rallies, be it debt or equity. But the fund's overtly aggressive posture also makes its performance highly susceptible to market volatility.
First, the good bit. This fund has been one of the biggest income-earners in this category. The fund has generated annualised returns of 14.36 per cent since its launch in July 1999. That's not all. Even its three and five-year returns are right at the top of the category. The bad news, however, is that the recent equity and debt market volatility has badly tarnished its short-term performance report. The fund's year-to-date (till August 31, 2004) returns of negative 0.02 per cent places it at 19th position in a 26-member category. As you shorten the window further, the picture looks grimmer. Its six-month negative 1.25 per cent return gives it a rank of 32 out of 33 MIPs. Its three-month performance places it at 37th out of 39 schemes and its last month performance is the worst in a category of 41.
Is this really worrying? We would feel not, because this fund is meant only for those who have that kind of risk appetite. Its standard deviation of 0.65 is the highest in its category.
The fund has usually taken an above average interest rate bet, which helped it register the best performance in its category between Jan '01 and Mar '04, when interests rates were sliding. However, it is also the reason for the fund's poor recent performance (the yields had risen almost 150 basis points in a matter of three months). In response, the fund has reduced the average maturity of its holdings from a high of 5.09 years in May, '04 to 2.43 years by August-end. However, even that is way above the current category average of 1.5 years.
The average credit rating of the fund's debt holdings had fallen to AA between June - July '04. However, the portfolio quality has improved in August and the average credit rating is back to AAA. Currently, of its 85.39 per cent holdings in debt, almost 55.7 per cent is in AAA/P1+/G-secs and a further 16.75 per cent is in cash. Its equity holdings form 14.61 of the corpus and is primarily large-cap oriented (61.3 per cent). It cashed in on the 2003 bull run, by investing 13.75 per cent of its equity between April '03 to Jan '04 and thus gained 18.14 per cent during this period.
So, if you have an appetite for high risk and a hunger for high returns then this is exactly what you are looking for. With this fund, thinking long-term is probably a better strategy.