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Fund Pick: Alliance '95

Background

Alliance '95, an open-end balanced fund seeks long-term capital appreciation and current income from a portfolio of equity and fixed-income securities. Usually the fund invests 60 per cent of its net assets into equities and holds the balance in investment grade bonds and money market instruments. The fund allocation to equity and debt is periodically re-balanced.

Performance

Launch of Alliance '95 closely followed a long phase of market decline, prevailed for over four years. In its initial two years of operations, the fund could only guard its assets. Because of its initial performance the fund was also under redemption pressure. The fund's outstanding unit capital came down significantly from Rs 71 crore in February 1995 to Rs 39 crore in December 1996. After a disappointing performance in its first two years, the fund just went ballistic from May '97. Currently, the fund is not only the top ranking balanced fund, but also beats most of the all equity funds over many time periods.

With its stellar performance, the fund's net assets have increased to Rs 281 crore as of now. As of September 1999, 72 per cent of the portfolio was allocated to equities of which Information Technology stocks accounts for 20.4% and Pharmaceuticals 10%. Alliance '95 has significantly reduced its exposure to FMCG (from 10.7% in June to 3.8% in September) and Automobiles and Ancillaries (from 6.1% to 3.2%) and increased stake in the cyclical sectors of Cement, Chemicals and Telecom. As a result 26.1 per cent of the assets is comprised of the cyclical and commodity stocks up from 19.5 percent till June 1999. Interestingly, the fund has outperformed most equity funds despite being a balanced fund with significantly less volatility. Alliance '95 has given three dividends till date, latest being 20% paid a month ago. Alliance '95 has been an outstanding performer giving an annualised return of 38.94 per cent since launch as on September 30, 1999.

Outlook

Alliance '95 is of special appeal to conservative investors seeking steady return with capital appreciation. Besides, the fund looks attractive for being less volatile than an all equity fund. Moreover, as the dividend from any open-end fund with over 50% allocation to equity has been exempt from any tax. Hence, even the earnings from the debt allocation becomes tax-free. This is a superior alternative to an investment in an all debt fund as the dividend will be subject to an effective 11% dividend tax payable by the fund. Given the concession, if you hold few debt funds for income and equity funds for appreciation, a balanced fund makes more sense, depending on your risk tolerance and income needs. Alliance '95 is an attractive alternative to Unit Scheme '64 for its transparency, serviceability and above all superior performance.

FUND BASICS
Objective	Size	NAV:22/10	Exit Price	Entry Price	Total Returns
Growth	281.5 Cr	42.38	42.38	43.12	38.94% pa
BENCHMARK COMPARISONS (%)					30/9/99
	1M	3M	6M	1Yr	3Yr
Fund	8.3	43.1	39.6	100.7	64.1
Sensex	0.8	13.8	20.7	37.6	53.5
Nat. Index	-1.0	9.5	17.4	34.2	50.7
Obj. Avg.	1.8	10.2	11.5	24.2	10.0
TOP HOLDINGS EQUITY (30/09/99)					Mkt. Value (Cr.)
Zee Telefilms					24.6
Infosys Technologies					18.9
NIIT Ltd.					10.5
Global Tele-systems Ltd.					10.3
Satyam Computer Services Ltd.					9.8
Digital Equipment (India) Ltd.					9.7
Larsen & Toubro Ltd.					6.0
Dr. Reddy's Lab.					5.5
Vikas WSP					5.2
Himachal Futuristics					5.0
HDFC Bank					4.5
Hindalco Ltd.					4.5
Rhone-Poulenc					4.5
ICICI					3.5
Archies Greetings					3.5
Punjab Tractors					3.3
Indian Shaving					3.3
Hero Honda					3.1
Tata Tea					3.0
Cipla					3.0

Mutual Funds

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