The Hindu Business Line : It's same pick for Alliance schemes

IT'S all in the family for the equity funds in the Alliance Capital stable, especially when it comes to the significant number of stocks that are common to their portfolios. What stands out most is the apparent likeness between Alliance Equity, the flagship growth scheme, and Alliance Frontline, the MF's latest offering.

Beginning with Digital Globalsoft (the No.1 holding in as many as four Alliance schemes, evident from their latest half-yearly portfolios), the resemblance comes courtesy stocks representing such sectors as IT services, petroleum and pharma.

Distribution sources point out that Alliance Frontline, which has BSE-200 as its benchmark index, makes a clear case on this front. The scheme targets the same sectoral weights within its portfolio as the index, subject to a certain predetermined flexibility.

Its top five holdings (as on September 30) are: ITC, HPCL, Reliance Industries, Gujarat Gas and HDFC Bank. Except Reliance, these are all to be found in Alliance Equity as on that date. In fact, HDFC Bank, HPCL and ITC occupy the third, fourth and fifth slots respectively in its portfolio.

The MF has also honed in on HPCL to a considerable extent - - - Alliance Equity, Alliance 95, Alliance Basic Industries, Alliance Frontline and Alliance Capital Tax Relief 96. The contribution by the oil company's stock to their portfolios has ranged from 2.59 per cent to 6.15 per cent.

Mr Samir Arora, Equity Fund Manager for Alliance, is singularly bullish on his picks, and justifies their presence in almost all the portfolios. "There is a reason behind each selection," he said.

MF watchers, however, suggest that while there is nothing seriously wrong in having the same stock across portfolios, an investor who has put his money in several Alliance equity funds simultaneously will not be free from worries. For him, the chances of maximising wealth diminishes as ''having too many stocks in common goes against the spirit of diversification'', it is felt.

Alliance sources point out that the equity schemes have a common objective: all of them chase growth. Therefore, the basic investment philosophy overlaps — a belief that has led the funds in question to focus on some common stocks. The MF otherwise sticks to product differentiation in the sense that diversified equity fund and sector fund clearly stay separate from the point of marketing.

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