2 More Funds for 2022 and Beyond

Susan Dziubinski: Hi, I'm Susan Dziubinski with Morningstar. Earlier this year, Morningstar FundInvestor editor Russ Kinnel flagged 15 funds that he likes for 2022 and beyond. He is here today to talk about two more funds that he wants to add to that list.

Thanks for being here today, Russ.

Russ Kinnel: Glad to join you.

Dziubinski: Let's talk a little bit about the choppiness that we've seen in the market so far in 2022. What are some of the factors that are behind that?

Kinnel: I think there are a few factors. It's always hard to know for certain, but I think certainly the prospect of Fed rate hikes is looming over the market as well as, obviously, rising inflation, which is part of the reason those rate hikes are expected. That's a concern. Though, of course, rates are really low right now. So, even some rate hikes wouldn't be huge. Possibly it won't be as bad as we're expecting. I think obviously another part of the story is COVID. We know by now that it's pretty hard to predict what the next turn is. I think obviously that's another worry for the market is we don't know what COVID will do to the economy for the rest of the year.

Dziubinski: Given that backdrop, Russ, how would you suggest that fund investors think about their portfolios today?

Kinnel: I think all you can do is just keep swimming. It's a difficult environment. It's always bumpy, but that's why you get superior returns from equities is that you have risks that you could lose 20% or 30% in the next month. That's always a looming risk. But the other side is that in order to enjoy those good returns, you actually have to own the stocks near the bottom. So, you want to stick to your plan, know your holdings, write down all your reasons for owning those holdings, as well as what you expect for the downside and upside so that when things do go poorly, you can consult that and that should provide some comfort provided you've got a good plan.

Dziubinski: Let's get to the picks. There are a couple of funds that we wanted to talk about today that build on that list of 15 funds that you wrote about earlier this year on Morningstar.com. The first fund is BlackRock Sustainable Large Cap Core, and we recently upgraded the Analyst Rating on the fund's cheapest share classes to Silver. Tell us about it and why it's on your list.

Kinnel: BlackRock has made a huge commitment to both ESG and quantitative strategies, and that commitment really comes together nicely in this fund. It's a quantitatively run fund. We like the process. We upgraded it because we like how this is very deep team, and they keep updating the process. So, they're always looking for new wrinkles to add, and I think that's really important for a quantitative fund because lots of other competitors are out there trying to do the same thing. So, you really need to keep evolving the process. This is a nice fund. Unlike some ESG funds, its sector biases are very modest. So, it doesn't, say, completely avoid energy or some of the other cyclical industries. That gives you kind of a straight-down-the-middle core exposure.

Dziubinski: And your second fund today, Russ, is T. Rowe Price Global Allocation, and that's a world-allocation fund. Tell us about it.

Kinnel: This is a fund where we upgraded the People to High. We really think highly of T. Rowe's allocation team. It's about 80 people deep. They run their allocation funds, the target-date funds. And so, we really think they've done a good job of improving both their people and processes. And at this fund, they're essentially tapping underlying strategies run by a lot of our favorite T. Rowe managers. So, you have good allocators, but you also have good stock- and bond-pickers underneath them. It's a really nice mix and, of course, super diversified as you'd expect from a global-allocation fund.

Dziubinski: Well, Russ, thank you for your fund ideas today and for your perspective on the markets. We appreciate it.

Kinnel: You're welcome.

Dziubinski:: I'm Susan Dziubinski. Thanks for tuning in.