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In the cover story, I looked at the top allocation funds
with less than
70%
equity. Here I’ll look at the
two categories with more than
70%
equity. There are
three very different Morningstar Silver Medalists
in the Allocation—
70%
to
85%
Equity category and
one Bronze Medalist in the Allocation—
85%
+
Equity category.
American Funds Income Fund of America
AMECX
With a Morningstar Analyst Rating of Silver, this fund
boasts a
12
-month yield of
3
.
09%
, placing it third
among all the allocation funds in the Morningstar
500
.
The only two that are higher are in the
30%
to
50%
Equity category. Yet, the maximum drawdown of
41%
and downside-risk capture of
113%
mark it as one
of the lower-risk funds in this equity-heavy category.
One reason is that it is right on the borderline of
the category with a
70%
equity weighting. Manage-
ment has been moving to the equity side because
it considers the yields on equities to be more appeal-
ing than those on bonds. Prior to
2011
, the fund’s
equity weighting was in the low
60
s. The basic idea
of the fund is to maximize yield without taking on
too much risk.
That’s a strategy that American has executed well here
and at other funds. Equities must have a yield well
above the S
&
P
500
’s. The bond side takes on some in-
terest-rate and credit risk to produce a decent yield.
The fund has landed in the top quintile of its peer group
for the trailing three-, five-, and
10
-year periods.
Fidelity Four-in-One Index
FFNOX
The Silver-rated fund has a set asset mix of
48%
in
Fidelity Spartan 500 Index
FUSEX
,
25%
in
Fidelity
Spartan International Index
FSIIX
,
14%
in
Fidelity
Spartan US Bond Index
FBIDX
, and
12%
in
Fidelity
Spartan Extended Market Index
FSEMX
. The all-in
fee is
0
.
22%
. The fund’s maximum drawdown was
46%
and downside capture is
147%
. Returns have landed
in the top quartile over the past three-, five-, and
10
-year periods.
T. Rowe Price Personal Strategy Growth
TRSGX
This Silver-rated fund of funds has a neutral setting of
80%
equities, making it a fairly aggressive fund. As
with other Personal Strategy funds, the asset mix can be
adjusted by the allocation team depending on its
view of markets. The underlying funds are strong and the
all-in fee is
0
.
78%
. The fund’s maximum drawdown
of
48%
and downside capture ratio of
153%
are worse
than the other two Silver-rated funds in the category.
On the plus side, the fund has top-decile returns over
the past five-,
10
-, and
15
-year periods, and its three-
year returns are just outside the top decile.
Franklin Mutual Shares
TESIX
This Bronze-rated fund is the Morningstar
500
’s sole
Medalist in the
85%
+ category. It’s a value strategy
applied to equities as well as distressed debt at
times—hence its place in the category. In its March
31
,
2016
, portfolio, the fund had
71%
in U.S. stocks,
19%
in foreign stocks,
4%
in bonds,
2%
in other
(usually convertibles or preferreds), and
4%
in cash.
That gives it a little less in stocks and little more
in bonds and foreign stocks than a typical large-cap
value fund. Its
50%
maximum drawdown and
152%
downside capture ratio show that things don’t
always go according to plan.
Also, performance has been rather middling depending
on the time period you pick. Lead manager Peter
Langerman looks for cheap stocks from a variety of
angles, including valuations, attractive merger
targets, or other types of distress. That was a good
formula for defense in the
2000
-
02
bear market,
but it didn’t do so well in the
2008
-
09
bear market
when many deep-value funds got burned by finan-
cials or heavily indebted cyclical stocks.
Ratings History
Fidelity Four-in-One Index has been rated Silver
since June
2012
. The other three have had their
current ratings since we launched Analyst Ratings
in November
2011
.
K
Funds on the Stock-Heavy Side
Tracking Morningstar Analyst Ratings
|
Russel Kinnel
What Are Morningstar
Analyst Ratings?
Our ratings are chosen for long-
term success. Analysts assess
a fund’s competitive advantages
by analyzing people, process,
parent, performance, and price.
They do rigorous analysis and
then submit their ratings to a
committee that vets their work
for thoroughness and consistency.