It may be true that past performance doesn’t guarantee future results, but a long track record may play well with investors during these tumultuous times. And that’s exactly what some prominent blended funds bring to the table.
“It’s nice to know there are funds that have been around and seen these sorts of fluctuation before,” said Dylan Cathers, mutual fund analyst at Standard & Poor’s, “and that they’ve weathered the storms.”
With that in mind, S&P ran a screen for five-star-rated blended funds to see which have been around the longest. The top three: American Funds’ Balanced Fund (A shares), T. Rowe Price Balanced Fund and Vanguard Wellington Fund (investor shares).
Blended funds, which invest across multiple asset classes, are a timely category. They offer the diversification of stocks and bonds and provide potential capital appreciation as well as current income.
“If you’d only been in equities, God knows you’d have had a headache over the past six weeks,” Cathers said.
S&P sees balanced funds as potentially attractive for conservative investors or those looking for a core portfolio around which to diversify.
Vanguard Wellington Fund has the distinction of having survived an even rougher period than the U.S. has been through in the past few yeas. It opened its doors to investors less than four months before the stock market crash of October 1929.
With $27 billion of assets, the fund recently had a roughly two-thirds to one-third breakdown of foreign and domestic equities to fixed income securities.
Over the past 10 years, the fund has outperformed its peers in the mixed-asset target allocation growth fund category by 220 basis points on an annualized basis through Aug. 26. Its trailing three-year performance is similarly strong.
Wellington has a 12-month yield of 2.75%, which is more than 100 basis points above its peers' average of 1.67%. S&P’s equity analysts have, on average, a favorable view of the fund’s holdings and it has an attractive risk profile and low expenses.
American Funds Balanced Fund is almost as old as Wellington, having started operations in September 1932. It has nearly $32 billion of assets under management and has a bond-to-stock ratio that’s similar to Wellington.
Over the past decade, it has bested its peers by more than 110 basis points annually. It’s also outperformed over the trailing one- and three-year periods, Cathers notes.
S&P gives the fund high marks for the credit quality of its holdings, and its standard deviation of 14.4 is below its peers’ average. American Funds Balanced Fund also boasts a management team that has been in place since 1986. Also in its favor are low expenses and turnover. S&P does point out that the fund has a maximum front-end sales load of 5.75%.
T. Rowe Price Balanced Fund is the youngster of the group, having opened in 1939. It’s got a little more than $3 billion of assets and it follows a stock-to-bond weighting that’s similar to its two elder funds. T. Rowe Balanced has an annualized trailing 10-year total return that’s more than 130 points higher than its peers.
Also in the plus column, Edmund Notzon III has been a manager on the fund’s team for more than 20 years. The fund's other risk metrics are neutral.
On the strength of its below-average net expense ratio and lack of a sales load, S&P assigns the fund a positive cost-factor score.
Register or login for access to this item and much more
All Financial Planning content is archived after seven days.
Community members receive:
- All recent and archived articles
- Conference offers and updates
- A full menu of enewsletter options
- Web seminars, white papers, ebooks
Already have an account? Log In
Don't have an account? Register for Free Unlimited Access