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June 21, 2000

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Alliance Liquid Income Fund

Dhirendra Kumar

Alliance Liquid Income Fund, launched in March 1997, is an open-ended intermediate term debt fund. The fund is fully invested in debt instruments and money market securities. The fund has an internal stipulation to limit its exposure in any single instrument to 15 per cent (other than call money) and the overall exposure in any industry to 25 per cent.

The fund provides growth and dividend plans besides 54EA/EB options. The fund has been consistent in its dividend payouts aggregating to 37 per cent till date. Investment in the fund is without any load. The fund charges an exit load of half percent for redemptions within six months.

The fund has been a steady performer with a quality debt portfolio. The fund has been actively managed rotating in and out of different maturities in line with the general perception of the interest rate movements. This strategy has brought reasonable amount of success as well. The expectations of falling interest rates since the beginning of 1999 have led the fund to largely have a higher maturity profile, notwithstanding the intermittent volatility.

The fund has seen huge inflows all through 1998 and 1999, which were increasingly invested in government securities due to a paucity of quality paper. This resulted in the fund booking smarter gains through 1999 and early 2000. However, the redemption pressure in March 2000, forced the fund to go on the short end, and pulled the net asset value down. Despite the consistently pared allocation to corporate bonds, the fund continues to have a diversified portfolio.

Currently, the huge size of the fund is a constraint, which when invested in gilts, given the lack of quality paper in the market, will make the fund susceptible to volatility in the face of sudden changes in the interest rates.

Fund Basics          
Objective Size (Rs cr) NAV:19/6 Exit Price Entry Price Total Returns (%)
Income 918.08 14.80 14.80 14.80 12.60%
Benchmark Comparisons (%)        9/6/2000
  1M 3M 6M 1Yr 3Yr
Fund -0.2 2.1 6.3 12.7 12.6
I-BEX Total -1.1 1.6 7.7 15.7 15.1
Obj. Avg. 0.2 1.8 6.8 12.8 12.9
Top Holdings (31/5/2000)         Net assets (%)
GOI 2004         12.08
GOI 2004         11.81
Reliance Industries         5.20
GOI 2001         4.99
GOI 2009         4.97
IDBI         3.84
ICICI         3.79
GOI 2007         3.34
GOI 2008         2.82
Reliance Capital         2.68
Power Grid Corporation         2.24
GOI 2001         2.22
Ashok Leyland         2.20
IPCL         2.18
Indian Railway And Finance Corp.         1.85

Source: Value Research

Fund File

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