The Hindu Business Line : DWS Alpha Equity: Hold

Unitholders can retain their holding in DWS Alpha Equity in the light of its improving return record. The fund, which focuses on predominantly large-cap stocks, had a forgettable year in 2005 when it significantly underperformed the benchmark and its peers. However, the fund’s performance has improved significantly since, with the fund navigating the recent corrective phase well. Given the relatively short track record, the fund need not be a part of one’s core portfolio at this juncture. But its strong performance over the past year has been noteworthy and bears further monitoring.

Suitability: Alpha Equity’s focus on large-caps makes it suitable for investors with a conservative-to-moderate risk profile. The fund tends to take focused exposures to stocks, which pegs up the risks associated with stock selection. However, the fund has the advantage of a small asset base, which allows it to reverse positions or switch between stocks and sectors in a timely and cost-efficient manner.

Performance: DWS Alpha Equity figures within the top ten funds in the diversified equity category in the one-year performance rankings with a return of about 7.1 per cent. This has been a year in which several equity funds have registered negative returns. The fund has shed about 28 per cent in 2008, a little lower than its benchmark, the Nifty (31 per cent down).

Alpha Equity added exposure to the right sectors in early 2008. The fund rapidly trimmed exposures to banking and construction, which were its top sectors as of January, and added FMCG, telecom and ferrous metal stocks. This appears to have stood it in good stead during this correction.

Although its performance in 2004 and 2005 was not particularly impressive, its performance has improved since 2006. The fund outperformed the benchmark by more than 10 percentage points in both 2006 and 2007.

Sundaram Select Focus, which also follows a similar investment strategy of taking concentrated bets, has however delivered significantly higher returns reckoned over a three-year period.

Portfolio overview: The fund manages a compact portfolio of less than 30 stocks. It takes large bets on a few stocks; the top 10 stocks account for about 45 per cent of the portfolio. Sector allocations are not too concentrated, however, and the portfolio features stocks from a broad range of sectors. The portfolio also does not limit itself to stocks from the Nifty basket alone, with stocks such as Sintex industries, Gujarat NRE Coke, Bombay Dyeing, Tata Chemicals and Deep Industries figuring in the portfolio. The fund is managed quite aggressively, going by the high portfolio turnover of 2.39.

Fund facts: DWS Alpha Equity was launched in January 2003. The fund had an asset base of Rs 137 crore as of May 2008.

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