• / Free eNewsletters & Magazine
  • / My Account
Home>Research & Insights>Investment Insights>Three Fund Changes You Might Have Missed

Related Content

  1. Videos
  2. Articles

Three Fund Changes You Might Have Missed

These funds aren't what they used to be--which might increase their appeal.

Gregg Wolper, 04/23/2010

Change is common in the mutual fund world. Although some of the best funds keep their managers and strategies in place for years or even decades, many other offerings undergo alterations that can have a substantial impact on the fund's profile.

Most readers are much too busy to keep track of all these changes. So we do our best to keep you apprised. Some changes, though, are more subtle or more gradual. But such alterations also can be have a substantial impact. Here's a look at a few funds that fall in that camp.

Prudential Jennison Blend PBQAX
In 2005, this fund adopted the same basic layout as Prudential Jennison 20/20 Focus PTWAX. Like that fund, it split its portfolio between two excellent Jennison managers, Sig Segalas (with Blair Boyer) on the growth side and David Keifer on the value side. (Note that the latter has a flexible view of value, often landing in the blend part of the Morningstar Style Box.) Though the Blend fund's portfolio held about 85 stocks, versus the 40 contained in 20/20, the two funds otherwise were very similar.

At the end of 2008, though, the advisor made a significant change in Prudential Jennison Blend, adding a small/mid-cap component to its mix. As a result, this fund's average market capitalization has fallen to $11.6 billion, just one third of the large-growth category average. Prudential Jennison 20/20 Focus has an average market cap of $25 billion.

The addition of the small/mid-cap component, managed by Jennison's John Mullman, makes the Blend fund more appropriate than it had been for investors who want broad U.S. stock-market exposure in one fund. Moreover, Mullman has racked up a fine long-term record on the fund he runs, which is totally focused on that small/mid-strategy, Prudential Jennison Small Company PGOAX.

Prudential Jennison Blend does carry the risk of greater volatility now that it has added that stake in small companies, and a fund now containing more than 300 stocks (small-cap portfolios tend to be broad) doesn't offer the conviction of a focused portfolio. But this fund is worth considering in its new guise.PAGEBREAK

Fidelity Four-In-One FFNOX
This fund of funds has undergone two noteworthy changes. Its portfolio consists of four Fidelity index funds that target U.S. large caps, U.S. small caps, U.S. bonds, and foreign large stocks, respectively. Unlike target-date funds, which adjust their allocations over time, this fund remained static for its first 10 years. In late 2009, though, Fidelity made a top-down decision to raise the foreign weighting in a variety of funds, including this one. This fund's foreign-stock stake jumped to 25% from 15%, while its S&P 500 allocation declined to 45% from 55% and the small/mid-stake dropped a bit as well.

This change concerned me when it happened--not because foreign stocks are destined to underperform (no one knows whether they will) but because prior to that time, the fund's shareholders had good reason to think this fund's allocations would stay intact. However, for prospective owners evaluating the fund, that's water under the bridge. And even if we now know that the fund's current allocations aren't necessarily permanent, it's unlikely they'll change with any frequency.

blog comments powered by Disqus
Upcoming Events
Conferences
Webinars

©2014 Morningstar Advisor. All right reserved.