American Century Fund Weathers Tough Stock Market

This offering's bond stake has been keeping it out of serious trouble lately.

American Century Strategic Allocation: Aggressive Fund (TWSAX) came into 2000 with the look of a fund that should have fared poorly. With more than a third of the fund's stock holdings falling in the technology sector, including highfliers such as JDS Uniphase (JDSU), Qualcomm (QCOM), and America Online , the fund had a rough time during last spring's tech slide. The fund lost 6.5% of its value for the three months ended May 2000, while its average large-blend rival posted a modest gain over the same stretch. Of course, the fund also entered 2000 with about 16% of its assets in cash and bonds, which provided considerable ballast while the fund's tech holdings were under assault last spring. And by the end of September 2000, manager Jeff Tyler had cut the fund's equity stake to a little less than two thirds of assets, upping the fund's allocation to cash and bonds. That move provided a considerable cushion for the fund as its favored tech names were battered again in the fall of 2000. Indeed, falling long-term yields and the Treasury Department's buyback program gave a lift to the bond portion of the portfolio, helping the fund edge out more than three fourths of its large-blend rivals in 2000.

This year has provided a continuation of that story, so far. Management has cut the fund's technology stake considerably, but the equity portion of the portfolio has continued to struggle along with the broader market. But with the Federal Reserve cutting short-term interest rates and long-term yields continuing to fall, the bond portion of the portfolio has continued to rally, keeping the fund ahead of 80% of its large-blend peers for the year to date through February 26, 2001.

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