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Don't Count These Allocation Funds Out

Jeff Holt, CFA

Jeff Holt: In early April, we downgraded the [Morningstar Analyst Rating] for the four Manning & Napier Pro-Blend funds to Bronze from Gold, following the departure of two portfolio managers and the restructuring of the research team. These changes coincide with a rough patch of performance for the funds over the past year.

While the downgrade reflects heightened uncertainty going forward, there is still good reason for investors to stay the course. Manning & Napier has a deep senior leadership team that can be expected to stay true to the firm's long-standing, successful process. And that process remains focused on absolute returns and flexibility.

After finding a co-sponsor, analysts recommend stocks for the portfolio managers to consider, and the absolute returns of stocks that make it into the funds affect the compensation of both the lead and sponsoring analyst.

Flexibility plays an important role here, given the focus on absolute returns. These funds have wide ranges of allowable stock exposure. For example, the moderate-term fund may have between 20% and 60% of its assets in stocks. Shifts are also made at the sector and country levels, with analyst recommendations being the main driver of portfolio positioning.

Investors should be aware of the changes at Manning & Napier, but they should think twice before turning their backs on the Pro-Blend funds.