Despite the blip in the performance of DWS Alpha Equity, its decent track record still makes it a worthy pick
After a top quartile performance for three consecutive years, the fund found itself in the bottom quartile in 2009. But investors should not be in a hurry to write it off.
The fund manager maintains a compact portfolio and limits his mid- and small-cap exposure to around 25 per cent of the portfolio. Last year, his mid-cap exposure failed to give the boost despite rising from 12 per cent (February 2009) to 25 per cent (May 2009). In fact, the fund faltered in the June quarter of 2009 with a return of just 33 per cent, below the category average (41%) and benchmark (42%). The fund manager did not hop onto the rally in time and cash exposure dropped only in May. Even till June, the exposure to FMCG was 16 per cent. "Between March and May, the Sensex moved up 85 per cent. And the stocks that fell the highest in 2008 were the ones to immediately bounce back in 2009. However, the moment the Elections results were declared, we reshuffled our portfolio and made significant changes to factor in the new environment," says fund manager Aniket Inamdar.
With the number of stocks ranging from 20 to 31, one can expect concentrated stock bets. The top 10 holdings of the fund account for around 57 per cent of the portfolio. Though allocation to a single stock has exceeded 9 per cent on many occasions, it is only in the large cap bets. "If a stock has good potential for appreciation, then I am willing to take a reasonable bet on it. I don't believe in just packing the portfolio with stocks needlessly. We believe that diversification means trying to find stocks with negative co-relation to each other," says Inamdar.
On the face of it, the fund appears to follow a mixed strategy. While a few of the large caps have been held since inception, one-fifth of its portfolio comprises stocks which are held for five months or less. Inamdar disagrees when asked if he churns the portfolio rapidly. "We don't churn our portfolio a lot. But in the recent past, it has been a range bound market where more trading takes places. This coupled with inflows and outflows has probably resulted in a higher than normal turnover ratio," he says.
Despite the blip in performance last year, the fund has established a decent track record that makes it a worthy pick in this space. Its 5-year annualised return of 22 per cent is higher than that of the category average (18%) and the benchmark (18%), as on August 31, 2010.
