News reports reveal that Alliance Capital Mutual Fund has been bought over by Birla Mutual Fund. The merger, an impending reality, was waiting to happen once an interested buyer struck a deal that was to Alliance Capital's liking.
That has happened now and Alliance Capital schemes will now be managed under the aegis of Birla Mutual Fund.
First a little background on Alliance Capital Mutual Fund. Alliance Capital Mutual Fund was perhaps as popular amongst investors as its 'star' chief investment officer (CIO) -- Samir Arora. Arora took the fund house and its investors to dizzying heights during the tech rally in 1999-2000.
Alliance Equity Fund (diversified equity fund) and Alliance 1995 Fund (balanced fund) figured among the leading funds during that time. Investors were very pleased with the scorching performance and made a neat packet on their investments.
Then the tech rally fizzled out in March 2000, and Alliance Capital mutual fund schemes were among the hardest to fall. The aggressive investment style that drew in the accolades brought about the fund's downfall. Suddenly the 'star' fund manager seemed to have lost it and investors were left in the lurch.
The aggressive and concentrated portfolio strategy was pretty much the defining trait of Alliance Capital Mutual Fund's investment style since inception. And it worked on and off as far as investors were concerned.
When Alliance Capital of USA announced plans to exit the mutual fund business in 2003, there were several suitors lined up. Among them was Samir Arora himself. However, talks with the suitors fell through and Alliance Capital was on its own once again.
That was until a few months ago, when Alliance Capital revived the takeover discussions culminating in Birla Mutual Fund agreeing to buy out the former.
It is ironical that Birla Mutual Fund should take over Alliance Capital Mutual Fund. There was a time when Bharat Shah (ex-CIO of Birla Mutual Fund) and Samir Arora were the two most 'popular' names in the mutual fund business.
Both had similar styles of taking concentrated bets on illiquid stocks. Both had an aggressive streak that made them household names. Both also had a very indifferent end to their fund management careers. Bharat Shah quit Birla Mutual Fund in 2000 and Samir Arora had to quit Alliance Mutual Fund in 2003.
So what does the takeover by Birla Mutual Fund mean to Alliance Capital Mutual fund investors? Unfortunately, it does not mean a great deal. Over the years, except for a brief flash in 1999-2000, Birla Mutual Fund hasn't really put in a performance of any note.
At least not on the same lines as HDFC Mutual Fund, Templeton Mutual Fund and now HSBC Mutual Fund. Birla Mutual Fund has also been troubled by 'fund management turnover'. After Bharat Shah's exit, Paras Adenwala took charge for some time and last month, he quit Birla Mutual Fund as well.
In our view, it may not have been the best deal for investors in Alliance Capital Mutual Fund, given that process-driven funds like HDFC Mutual Fund and Principal Mutual Fund, were also in the race, according to reports in the press.
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