Managers Offer More Flexible Funds That Time the Market

Sensing that investors are still worried about market volatility and a reversal of this year’s rally, fund companies are increasingly allowing their managers to hold larger amounts of cash, or offering tactical, dynamic, absolute-return or other types of funds that have the flexibility to reverse course.

And these funds are selling neck-to-neck with equity funds, with investors placing $4.1 billion into allocation funds in the first nine months of the year, compared with $4.3 billion into stock funds, according to Morningstar. Of course, this pales in comparison with the $213 billion invested in bond funds in this period of time.

But the need to offer flexible funds was proven by the poor performance last year of “investment products that were not able to react to the environment that we just went through,” Joel Sauber, head of U.S. products at Legg Mason, told The Wall Street Journal.

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