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The Alliance'95 Fund: Sell

S. Vaidya Nathan

INVESTORS in The Alliance'95 Fund can contemplate cutting exposures despite its impressive performance over a seven-year period and fairly good performance in the last year. The possibility that Alliance Capital may decide to exit the Indian markets (it has appointed an advisor to look at strategic options for its mutual fund business in India) is reason enough to cut exposures in this balanced fund with a distinct style that has paid off.

If Alliance Capital is taken over by any other fund house, there are some significant implications, especially for The Alliance'95 Fund. Alliance' 95 has always been a highly aggressive balanced fund, with 65-80 per cent exposures in equities at various times (it is now around 68 per cent).

Within this high equity basket, the fund has always maintained an aggressive sector and stock selection approach. Its technology/telecom/media exposures were well in excess of 55 per cent of assets in 1999-2000 and even now it is fairly high at around 25 per cent. The fund, however, has had returns to show for this and has compensated for the risk with a 24 per cent return per annum every year since 1995.

No other balanced fund has adopted such an aggressive approach. If any other fund house takes up the fund, even if it decides to maintain the distinct positioning, there will be question marks on whether the fund management style will continue.

Further, if the firm that takes over Alliance decides to merge this scheme with its in-house balanced fund, it could prove disadvantageous for investors in The Alliance'95 Fund.

Almost every potential bidder already has a balanced fund in its basket of schemes and, barring Zurich, none with as good a track record. So, a merger cannot be ruled out entirely.

With this big uncertainty looming large, investors — especially those who entered early — in the Alliance'95 Fund can contemplate moving out now.

It may not be worth the risk of waiting for some concrete action and indications from the would-be buyer before taking such a decision.

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