A Rough Patch for Flexible Allocation Funds
Boring balanced funds plus one bold allocation manager rule the roost this year.
Funds with bolder allocation strategies are struggling because of the Greek financial crisis.
In recent years, aggressive asset-allocation funds have run circles around traditional balanced funds. Some of these flexible funds cut back their stock holdings dramatically during the 2007-09 bear market--or even bet against stocks during part of the downturn. As a result, they emerged from the carnage as heroes. If they also leaned heavily on foreign stocks, they performed even better.
But it's been another story in 2010. Boring balanced funds, which typically keep about 60% of their assets in stocks and the rest in bonds and tend to focus on U.S. securities, have come on strong. Take Fidelity Balanced (FBALX), which epitomizes dullness. It sticks with a 60/40 mix and keeps its sector weightings in line with those of Standard & Poor's 500-stock index. Year-to-date through August 25, the fund was up about 3%, topping 86% of its peers. Vanguard Balanced Index (VBINX), as humdrum as they come, outpaced 88% of its rivals.
Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.