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Fund Spy: Morningstar Medalist Edition

5 of Our Favorite Moderate-Allocation Funds

Energy and equity weightings told the tale in recent years.

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In the short run, asset class and sector weightings generally explain allocation funds’ performance. That’s certainly been the case for the past three years. But over the longer term, manager skill, strategy, and expenses play larger roles. Focusing on those more enduring attributes helps separate the wheat from the chaff. We’ve done that among balanced fund with our Morningstar Analyst Ratings perhaps more than any other asset group. Indeed, our batting average in that area is the highest of any asset class. Over the trailing 10 years, we have a batting average of 90%, meaning 90% of our highest-rated funds outperformed their peers over the time they had our highest rating. And 54% finished in the top quartile.

Our moderate-allocation funds with Morningstar Analyst Ratings of Gold have outperformed over the past three years, though I should note we recently downgraded one that underperformed to Bronze. Over the past three years, an allocation fund’s stake in U.S. equities has been crucial, as they have trounced bonds and foreign stocks. (Moderate-allocation funds are those with at least 10% in bonds and between 50% and 70% in equities over a three-year average.)

Russel Kinnel does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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