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World-Allocation Fund Category Heating Up

Plus, Fairholme ups its AIG stake, and more

Morningstar Analysts, 10/18/2010

The world-allocation category is a new thing--at least for some fund companies. More than 20 world-allocation funds have been launched so far in 2010, while only 32 of these offerings launched in 2008 and 2009 combined.

It's no mystery why fund companies are eager to launch new world-allocation funds. The category has had large, positive inflows every year since 2001. In the year to date through September, the category has gained $8.5 billion in new investor assets. Meanwhile, many domestic-equity categories have experienced outflows of $5 billion or more of investor assets so far this year. The strong inflows in the category may be partly a case of performance-chasing. The category's 5.31% annualized five-year performance leads all other balanced categories.

Fund companies with no previous presence in the category, including T. Rowe Price and Nuveen, are vying to get investor attention with their new funds. That will be tough because successful funds from American Funds, BlackRock, First Eagle, Ivy, and PIMCO dominate the category in terms of long-term records and assets.

The nearly 100 distinct funds in the category invest in a combination of stocks, bonds, and cash from all over the world.

Berkowitz Ups AIG Stake Again
As Morningstar noted in September, Fairholme Capital has continued to increase its position in American International Group AIG. At that time, Fairholme owned almost 33 million shares of AIG, or 24.4% of its common stock.

According to a filing made this month, Fairholme's stake in AIG has climbed a bit, to 36.7 million shares, or 26.6% of its common stock.

DuPont Unit Launches Emerging-Markets Fund
A wholly owned subsidiary of chemical company E.I. DuPont de Nemours Company DD recently launched a mutual fund.

The DuPont Capital Emerging Markets fund will invest mainly in equity and equitylike securities, including preferred stock and convertibles. At least 80% of assets will be invested in companies that are domiciled or traded in emerging markets or that derive at least half their revenue from emerging markets. Exchange-traded funds that invest in emerging markets are also eligible for the portfolio.

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