Unit holders can reduce their investments in DWS Alpha Equity Fund. Focussed primarily on large-cap stocks, the fund has underperformed both its benchmark and peer funds over different time periods.

On a five-year basis, the fund has delivered a compounded return of 5.8 per cent, a slight premium over its benchmark's 4.9 per cent. While the fund had shot to the limelight after its impressive performance in 2007-08, its performance since hasn't been very stable.

Besides, it has a chequered record of performance during market rallies.

Investors may be better off exiting the fund and going, instead, with established large-cap equity funds such as HDFC Top 200 and Quantum Long Term Equity.

Performance: Alpha Equity typically takes focussed exposure to stocks. While having a small asset base affords it greater freedom to reverse positions or switch between stocks, the focussed approach to individual stocks pegs up the risks associated with stock selection.

For instance, the fund had a significant 9 per cent exposure to Reliance Industries a year ago. With the stock having underperformed this year, the high exposure to the stock seemed to have rubbed on negatively on the fund's one-year scorecard.

While the fund's exposure to the stock now stands at about 5 per cent, its performance wasn't impressive. It delivered a negative 12.3 per cent over the year as against a negative 10.2 per cent put in by its benchmark CNX Nifty.

The fund's performance was a shade lower than the category average also. The fund has trailed its benchmark over two-, three- and five-year periods also.

In contrast, Sundaram Select Focus and Kotak 50, which also follow a somewhat similar investment strategy of taking concentrated bets, have delivered higher returns reckoned over a three-year period.

Additionally, Alpha Equity doesn't have an encouraging track record of performance during periods of market upswings. But for 2007 when Alpha equity outpaced its benchmark by a significant margin, it has largely trailed Nifty during market rallies.

For instance, during each of the market uptrends seen in 2006, 2009 and 2010, it had underperformed its benchmark. Its performance during market correction, however, has been quite notable on many occasions.

Its large-cap focus and sector choices helped it control downsides better than its benchmark during the market corrections in 2004, early 2007 and the prolonged fall in 2008-09. For instance in the 2008 meltdown, it was the exposure to the right sectors that had helped the fund limit its NAV losses.

It had swiftly trimmed exposure to banking and construction, which were its top sectors in January 2008, and added FMCG, telecom and ferrous metal stocks.

As a result, it shed only about to 48.3 per cent in 2008; Nifty and category average performances came in worse at minus 52 per cent and minus 51 per cent, respectively.

Portfolio overview: The fund manages a compact portfolio of less than 30 stocks and takes large bets on a handful of stocks.

In its March-2012 portfolio, the top 10 stocks account for about 58 per cent of its total investments. Even in terms of sector allocations, its portfolio is relatively more concentrated (than peer funds such as Sundaram Select Focus and Kotak 50).

While the top three sectors make up 52 per cent of its portfolio, it has a fair representation from a broad range of sectors. Notably, its portfolio isn't limited to stocks from the Nifty basket alone. Stocks such as JBF Industries, Dish TV, IRB Infrastructure Developers, Va Tech Wabag, Manappuram Finance and Arvind also figure in it.

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