A reader gets us thinking about quirky allocation funds.
The best ideas often come from our readers. Two weeks ago, reader David M. sent feedback on my coverage of Manning & Napier Pro-Blend Moderate Term
Once Bitten . . .
It's natural: Get burned bad enough and you start avoiding the stove. That's what has happened to some equity fund investors since 2008's brutal market. They were scorched and have sold their stock funds and piled into Treasuries, CDs, and money markets. But if you have a long time horizon, you need some stock exposure or, at least, exposure to securities with the potential to post equitylike returns.
And even those who discovered the hard way that they had too much money in stocks shouldn't completely withdraw from them. It may be impossible to make back your nest egg over time if you don't keep at least some riskier, but potentially higher-returning, asset classes in your portfolio mix.
Allocation funds can fill the gap. The classic balanced fund kept a 60%/40% mix of stocks and bonds. The former was anchored in blue-chip stocks, and the latter portion was in Treasuries and the highest-quality corporate debt. Fine examples of the classic format still exist.
Breaking the Mold . . .
But there's a different breed of more-flexible offerings that have proved their mettle over the long haul. They go further afield, own a variety of more-esoteric securities, and often drastically adjust their asset allocations. The best have hit the sweet spot of equitylike returns--or better--with considerably less volatility than stocks. They're worth a look for all investors.
This conservative-allocation fund keeps its equity exposure to less than 30% of assets, yet it has returned an average of 8.6% annually since its 1987 inception. Its managers are experienced and have a record of strong stock-picking across the market-cap spectrum, focusing on dividend-paying stocks. They're no slouches on the bond side either, excelling with their picks in corporate and high-yield debt and convertible bonds. The fund is dirt-cheap and nimble. It deserves more attention.
Calamos Growth & Income