World-Allocation Fund Category Heating Up

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.

Ten Largest World-Allocation Funds

  Inception Date Fund Size (USD billions) Total Ret YTD (Daily) Base Curr Total Ret 1 Day (Daily) Base Curr Total Ret Annlzd 3 Yr (Daily) Base Curr Total Ret Annlzd 5 Yr (Daily) Base Curr American Funds Cap Inc Bldr (CAIBX) 07/30/87 77.80 7.27 0.58 -4.21 5.00 BlackRock Global Alloc  02/03/89 43.60 6.17 0.70 0.57 7.09 First Eagle Global (SGENX) 04/28/70 23.00 10.96 0.84 2.46 8.56 Ivy Asset Strategy (WASCX) 04/20/95 22.70 5.19 0.75 1.23 11.37 Wells Fargo Advtg Asset Alloc (EAAFX) 07/29/96 8.30 5.74 0.67 -0.16 4.93 PIMCO AllAsset AllAuthority (PAUIX) 10/31/03 7.90 13.38 0.27 8.63 7.96 Thornburg Invtmt Inc Bldr (TIBAX) 12/24/02 5.90 9.96 0.82 -1.30 8.76 IVA Worldwide  09/30/08 5.80 12.19 0.80 n/a n/a GMO Glbl Bal Asset Alloc III (GMWAX) 10/22/96 3.30 5.63 0.70 0.72 5.93 Waddell & Reed Asset Strat (UNASX) 03/09/95 3.20 4.97 0.67 2.12 12.78 Morningstar data as of 10-13-10.

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  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.

The fund's advisor is DuPont Capital Management Corporation, and it will be managed by Rafi U. Zaman, managing director of global equities. The advisor was established in 1975, became a registered investment advisor in 1993, and, as of March 31, 2010, had about $24.5 billion in assets under management.

The A share class, which has a minimum $5,000 initial investment, will have a 1.75% expense ratio, which would land within second-cheapest quintile for front-load emerging-markets stock funds. To discourage frequent trading, the fund also levies a 2% redemption fee on shares held fewer than 60 days.

Etc.
USAA recently filed to launch two new funds. Its Ultra Short Bond fund will have an expense ratio of 0.65% and will be managed by Anthony M. Era Jr., while the new Real Return fund will have a 0.85% price tag. It will be run by a team from USAA including John P. Toohey, Wasif A. Latif, R. Matthew Freund, Arnold J. Espe, Margaret "Didi" Weinhlatt, Mark W. Johnson. Comanagers Julianne Bass and Dan Denbow are with IMCO, an affiliate of USAA and the fund's manager.

Edward Rick IV is no longer a portfolio manager of AIG Small-Mid Growth . Linda Freeman, Jeffrey Drummond, Jeffrey Harrison, and Paul Carder will continue to serve as portfolio managers.

Peter Stournaras was added as a portfolio manager of the core portfolio of  BlackRock Balanced Capital (MDCPX),  BlackRock Large Cap Growth ,  BlackRock Large Cap Value (MDLVX),  BlackRock Large Cap Core (MDLRX), BlackRock Large Cap Growth Retirement , BlackRock Large Cap Value Retirement , and  BlackRock Large Cap Core Retirement .

BlackRock Income Builder (BABDX) will change its name to BlackRock Global Dividend Income on Nov. 1, 2010.

Daniel Breslin was added as a portfolio manager to  Lazard U.S. Mid Cap Equity .

Michael DeBernadis and Robert Failla were added as portfolio managers to Lazard U.S. Small-Mid Cap Equity (LZCOX).

D. Andrew Shipman is no longer a portfolio manager for PNC Balanced Allocation  and PNC Large Cap Value  as of Oct. 6, 2010. Michael Santelli and Alex Vallecillo were added as portfolio managers to the funds.

Paul Hayes is no longer a portfolio manager for  PNC Mid Cap Value  as of Oct. 6, 2010. Edward Johnson was added as a portfolio manager to the fund.

Charles Brennaman is no longer a portfolio manager for Team Asset Strategy . James Dailey is solely responsible for day-to-day management of the fund.

The Board of Directors of Vantagepoint Asset Allocation  approved a proposal to liquidate the fund on Dec. 3, 2010.

Effective Dec. 15, 2010, Dreyfus International Stock Index (DIISX),  Dreyfus International Value , Dreyfus International Equity (DIEAX), Dreyfus Diversified International (DFPAX), and Dreyfus International Stock  (DISAX) will no longer assess a redemption fee on shares that are redeemed or exchanged before the end of the required holding period.

Mutual fund analysts Ryan Leggio and Kailin Liu contributed to this report.