An Active 60/40 Fund From Fidelity Worth Considering

Key Morningstar Metrics for Fidelity Balanced Fund

• Morningstar Medalist Rating
  : Silver
• Process Pillar
  : Above Average
• People Pillar
  : Average
• Parent Pillar
  : High

Fidelity Balanced FBALX benefits from a potent group of stock-pickers and bond-fund managers, as well as a thoughtful allocation framework. For investors looking to outdo the typical US 60/40 portfolio over the long term, this fund is worth considering.

Lead manager Christopher Lee brings ample stock-selection and portfolio management experience to the table, although this is his first and only multi-asset fund. He had six months of onboarding when he became the sole lead manager in January 2023—a tight timeline for an allocation role, especially given the flexibility he has to adjust the stock/bond split here. That said, his role as the CIO of multimanager strategies gives him intimate knowledge of the equity sector managers’ processes, and his working relationships with the fixed-income team date back to his time as a financials sector analyst.

At any given time, the portfolio’s stock/bond split can shift by up to 10 percentage points in either direction per Lee’s market views. Though his tenure has been short, Lee has thoughtfully incorporated the firm’s macroeconomic and quantitative research into his allocation decisions thus far, paring back an aggressive equity overweighting as the stock market rose while tactically deploying assets to equities during the April 2025 market drawdown.

Within the equity sleeve, stock selection drives performance. The strategy ties the sector weightings to the S&P 500, allocating assets proportionally to Fidelity’s underlying sector managers while allowing each to invest up to 10% of their capital in adjacent sectors. Each sector manager employs their own investment philosophy. This leaves the strategy vulnerable to underlying personnel changes, and six of the nine current managers joined in or after 2020. Amid the turnover, Fidelity’s deep research group provides reassurance. Fidelity’s well-regarded core bond team manages the fixed-income sleeve. The team, led by Michael Plage, follows the same robust process that is used for Fidelity Investment Grade Bond FBNDX.

The fund’s institutional share class has produced best-quartile returns on both a total-return and risk-adjusted basis over the five and 10 years ended September 2026. Such outperformance comes from bottom-up security selection and the fund’s persistent overweighting in equities, particularly US growth stocks. The aggressive allocation stance amplifies both its upside and downside capture ratios versus the benchmark, though over Lee’s tenure the fund’s downside capture has consistently declined, a positive sign.

Fidelity Balanced Fund: Performance Highlights

This fund’s long-term track record tops most peers, and its risk/return profile has been improving lately.

The fund’s institutional share class has produced better absolute returns than its average moderate allocation Morningstar Category peer and Morningstar Moderate Target Risk Index category benchmark on a rolling three-year basis from 2012 through September 2026. The fund’s rolling three-year alpha against its category index was almost always positive from September 2008 through September 2026, which spans the tenure of Christopher Lee and his predecessor (Lee’s tenure started in late 2022). The fund’s consistent overweighting in US equities, particularly growth stocks, bolstered returns over the past decade as US growth stocks have trounced the rest of the world; the category benchmark and the average peer tend to have higher allocations to non-US stocks.

The aggressive allocation stance occasionally results in the fund taking a nosedive when stocks sell off, such as the last quarter of 2018, the first quarter of 2020, and the first three quarters of 2022. In each instance, the fund lost 2-5 percentage points more than its own custom benchmark of 60% S&P 500/40% Bloomberg US Aggregate Bond Index and landed in the worst quintile of its category. Following the stress periods, though, the fund made a rebound back to the top quartile and rewarded investors who stayed faithful. Encouragingly, since Lee took the helm, the fund’s downside capture ratio has continually declined and now sits below those of both the average category peer and its custom index. At the same time, the fund has continued to capture more of the upside versus both peers and the index.