Fund Firms Rethink Lineups in New Age of Conservatism

As investors have grown more conservative, fund companies are rethinking their entire product lineups, Dow Jones reports.

The damage that 2008 did to individual portfolios—the S&P 500 is down more than 40% since its peak in October 2007—has wreaked total havoc on key industry averages, and that bad news is likely to resonate with investors for some time. Because of how the markets performed in 2008, the S&P 500’s performance over the past 10 years through April 30 is negative 2.5%.

“Investors are bewildered,” said Madeline Novak, president of Novos Planning Associates. “The mind-set that we have worked under for the past 20 years has changed.”

Thus, fund companies are likely to put greater emphasis on bond, money market, balanced, absolute-return, target-date, index and guaranteed income solutions.

Robert Reynolds, the CEO of Putnam Investments, which launched a family of four absolute-return in January, believes competitors will do likewise, since the funds give investors a compelling reason “to get back in the market.”

Pimco launched an investment-grade bond fund on March 31, called the Pimco Long-Term Credit Fund. “We see greater interest in bond funds because of the liquidity, diversification, limited downside risk and low correlation with equities that they currently offer,” said Wendy Cupps, head of product management at Pimco.

Russ Kinnel, director of mutual fund research at Morningstar, agreed: “Under most scenarios, I think fixed income is going to be a growing area of interest for investors.”