Howdy, Stranger!

It looks like you're new here. If you want to get involved, click one of these buttons!

In this Discussion

Here's a statement of the obvious: The opinions expressed here are those of the participants, not those of the Mutual Fund Observer. We cannot vouch for the accuracy or appropriateness of any of it, though we do encourage civility and good humor.

    Support MFO

  • Donate through PayPal

Using allocation and balanced funds in a portfolio

edited January 2013 in Fund Discussions
I've noticed more and more over the last couple years MFO posters are turning to allocation type funds. That is the direction I took a few years ago when trying to rebuild my portfolio after the 'great recession'. I decided to hand the reigns over to good proven funds with managers or allocation styles that I believed in. I have drifted between allocating 40-50% over the past 5 years (right now 40%). I have tried to mix funds with different styles and methods. I have also made an attempt to only hold 4-5 of these funds at a time.

Like I mentioned, from reading many posts from others here at MFO, I think this (adding allocation/balanced funds) has become a trend at least at this forum. I would be interested to hear from others about what funds they are holding in this balanced/allocation category and at what percentage of their over-all portfolio.

Here is my 40% mix in this category:

FPACX @10%

Two other funds that were in the mix for years but were replaced by PAUIX and PGDPX were PRPFX and WASYX.

So, are others using well managed allocation type funds in their portfolio? And to what extent?


  • I have VWENX and VWIAX which combined represent about 13% of my port. Recently dumped PRPFX.
  • Good question, Mike! I'm interested in seeing the results.

    I have 10% of my portfolio in PAUIX and 6% in FPACX.

    There are a couple of others that I'm watching closely and waiting for a bit more history before investing. They are:
    --Pimco Global Multi Asset PGAIX, managed by El Arian and the core Pimco team. It's invested quite differently from PAUIX, which has different management even if it uses all Pimco funds, so I wouldn't see overlap if I held both.
    --AQR Risk Parity AQRIX. (You have to buy this one in an IRA to get in at the $2500 level, otherwise, its $5m.) I've held the very conservative AQR Diversified Arbitrage ADANX as a cash and short-term bond substitute for a couple of years now and they're fulfilling their mission of very safe market neutral returns.

    Like you and Gandalf, I also had PRPFX until a few months ago, not wanting to continue holding Treasurys and not feeling comfortable with the profile of its stock holdings.

    I also held Leuthold Global GLBLX until recently but didn't find its rewards to be up to its risks.

    I do hold stock and bond funds too, but tend to favor those whose managers have carte blanche to hold lots of cash when they think the market is frothy. (e.g, Yacktman and Sequoia, which are both over 15% cash now.)
  • Like many, tried PRPFX and VWIAX during the Great Recession, but got a hang of doing my own asset allocation and therefore now choosing more pure funds for broad categories. Within those categories however, i am choosing more flexible mandates. Categories and current allocations:
    23.0% US Equity
    15.0% FN Equity
    18.2% CREDIT
    8.3% CPI+
    21.2% FI
    13.0% SV+rphyx
    1.3% MM

    My several flexible mandates are within CREDIT..
  • Reply to @Gandalf: Have you checked the equity and bond overlap between Wellington & Wellesley? I question the wisdom of holding these two funds.
  • Hello. An interesting topic. The lone "balanced" or "allocation" fund I hold which includes both stocks and bonds in its portfolio is MAPOX, from Mairs & Power, out of St. Paul... M* rates it with "average" risk for its category, but with "high" returns and a "below-average" ER of 0.79%. I've owned it only since last Spring. Right now, it represents only 3.24% of my portfolio, but I'm still re-investing all dividends and cap. gains from ALL of my funds. However, it has become a yearly tradition to "raid" one of our non-tax-sheltered funds---MACSX--- in order to share some happiness with relatives over in Asia, just after the New Year.

    I would like it if the size of my MAPOX holding was bigger than it is, in proportion to my other stuff. Portfolio "construction" for us has been a matter of working through obstacles and hoops and detours through the years. It used to be that I held almost all mutual fund shares in a Trad. IRA or a 403b..... Now there's no more 403b, I rolled it over. And it's a good thing to be able to report that, having maxed-out my IRA contrib. for 2012 at $6,000.00, I was "forced" to take a bunch of new money and use it to open regular, taxable accounts. I chose not to just "sit" on the cash.
  • I went both ways.

    I currently own just one fund in multiple portfolios at this time: GLRBX. I used to own PRPFX, OAKBX, LCORX, IVWIX.

    LCORX was my biggest disappointment of these type of funds. IVWIX did not live up to my expectations. OAKBX performance cooled down as fund became bigger. PRPFX returns are highly dependent on its gold/silver as manager stock and bond picking is mediocre (as demonstrated by performance of his other pure funds).

    I use balanced funds as a conservative holding and my hope that in a correction, this will hold up or go down less so that I can sell to buy more of riskier assets after the correction. In other times, I am expecting slightly better return than bonds.

    However, when I sold PRPFX, I bought PONDX (1/2), SUBFX (1/4), RWGFX (1/4). I am hoping that this will perform better than PRPFX. I certainly made my share of mistakes and I will only know if these moves were better after the fact.
  • We continue to like the balanced/allocation space and currently own the following: PQIIX, LSWWX, PAUIX, PGDIX, AQRIX, PVSYX, IVWIX and SGIIX.

  • edited March 2013
    42.2% ---
  • I was a bit surprised to see no one had OSTVX, which I have been watching for about 6 months and am ready to jump in with finally. It was covered here once in 2012 and originally in 2011. No, it does not have a 10 year record, but its management team does. I have been comparing it mostly to MAPOX and DODBX, and I like its value tilt, I am an old UMBIX holder as my core fund (sold out when manager announced he would retire) and like managers that like the unloved but intriguing stories. I recently switched my retirement funds away from a supermarket to asset managed status at ML and have access to advice, but I still love to do my own research. Anyone have this one?
  • edited January 2013
    Have 3% in OSTVX and 4% PAUIX- love the flexibility of each. Recently sold RNCOX when I became concerned with the number of funds RiverNorth had plying the CEF waters.
  • Own FPACX, OAKBX and a little of PRPFX and WASYX. Not selling any of them. PAUIX looks interesting though.
  • Reply to @Ted: Thanks, I realize that, but am using them to get to a 50/50 mix.
  • FYI:
    Balanced Funds vs. U.S. Stock Funds (Duplicate Link),0,1311988.graphic
  • Readers of this board already know this, but there is a big difference between BALANCED funds and ALLOCATION funds. Traditional balanced funds have a fairly static mix of holdings, often 60% stocks and 40% bonds (VWELX) or 40% stocks and 605 bonds (VWINX). Those two are probably the best examples. Other balanced funds, where management must keep a very rigid or fairly rigid allocation, include PRPFX, DODBX, There are other funds that M* mis-labels balanced, where the managers have a lot of leeway in determining their allocation mix. Once in a while, M* gets it right and calls these global allocation funds. Perhaps the best examples of this kind of fund are IVAEX, FPACX, PAUIX, and TIBIX.

    I believe that true balanced funds can have a place in an investor's portfolio, especially if they do not want to spend time monitoring their funds on a regular basis. After all , there will be absolutely no surprises for owners of VWINX, VWELX, DODBX, PRPFX, and others like them. They are what they are. Buy them with the understanding that their allocations will probably be almost exactly the same in 10-15 years as they are now.

    True allocation funds are another ball of wax. You are buying the managers or management teams, so you need to do your research, and you need to minotor on a regular basis. Mike Avery, Steve Romick, Rob Arnott, and Brian McMahon and their teams have quite a bit of leeway. At IVAEX, for example, Avery and Caldwell can invest in just about anything, anywhere, or nothing at all. That's a far cry from VWELX to be sure.

    These funds have the potential to deliver market-beating returns. But they can also have some unpleasant surprises, too. Investors simply need to know and accept this as part of their go-anywhere strategy. Global allocation funds (or whatever you want to call them), can be used to add a little spice to a portfolio. Or, in an already diversified portfolio, they can sometimes help to reduce volatility if that is the manager's strategy.

    We have used PRPFX for ages, as a way to reduce volatility in clients' portfolios. It has never set the world on fire, and it has never been surprisingly bad, either. We would not count on the manager's stock picking ability to out-perform any market. He doesn't make many changes at all. But when things get awful in the world markets, it has been a relatively safe haven. PAUIX has a very different goal, as does IVAEX, and FPACX and other freer-range funds. We use PAUIX as another way to lower volatility. It just happens to have a very active strategy compared to PRPFX. These kinds of funds can offer some bridge between fixed-income and stocks.

  • edited January 2013
    Many great funds discussed in this post.

    Glad to see the folks at AQR getting some love. I personally own AQRIX and am increasing my holdings in it today.

    Let me add a couple others to the those mentioned so far: BERWX, another favorite on MFO, as well as WBMIX, which only Scott and I seem to like so far. And, BBALX, which David likes, but for the life of me, I don't really understand why=).

    For what it's worth, M* no longer categories FAAFX as an asset allocation fund.

    Building on theme from Four Funds for a Lifetime, I grouped the funds mentioned into two parts: life time down side deviation and/or draw down volatility (aka Ulcer Index) above and below 7.

    Here are the results, highest to lowest life time APR relative to SP500, regardless of age group:


  • edited January 2013
    Ya, I was gonna mention BERIX, too. In the past couple of years it's been disappointing, but it is supposed to be explicitly, deliberately conservative... I don't own it, but had been monitoring that fund for years.
  • Reply to @Charles: Did you evaluate GLRBX. If you did I wonder where it failed your criteria.
  • edited January 2013
    Reply to @Investor: Sir. Updated table to include GLRBX...a winner in my book.
  • Reply to @Charles: Thanks.
Sign In or Register to comment.