A sizzling return of 39% in less than three years - you would agree that it is not easily achievable without assuming that extra bit of risk. That's precisely what Alliance Equity has done - courting extra risk for that extra bit of return.
You may attribute the ballistic return to the bull-run, which coincided with Alliance Equity's launch. True, but the fund has also smartly capitalised on the soaring stock prices. Some of its peers, launched around the same time, have fared half as well as Alliance Equity. The credit for the sterling numbers goes to the stock selection strategy, which picks companies that sustain growth through internal accruals even if it means paying a premium for the stock.
With this strategy, IT and telecom stocks gradually evolved to be a part of the core portfolio and accounted for an average 57% of the assets last year. Yet, the fund has seldom held beyond 10% in a stock and thus, guarded against stock-specific risks.
This aggressive bias worked well in the bull-run of 1999, with the fund beating its peers by a huge margin. Impressively, despite a tech heavy portfolio, the fund limited the damage of the technology plunge on the portfolio to a mere 18% in 2000, thanks to savvy trading by the manager. However, the last quarter has seen the volatility of the sector catch up with the fund - the fund suffered a loss of 31%. Of late, with the tech stocks losing sharply, the portfolio looks re-balanced in favour of pharma and other economy counters.
Alliance has made it to the top with successful trend spotting. With a penchant for quality stocks and with nimble-footed management, the fund is likely to bounce back when markets revive.