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How Have Allocation Funds Done This Year?

With their smaller equity stakes, conservative-allocation funds have performed best, while tactical-allocation funds have turned in the worst results.


Janet Yang: We've seen some pretty choppy markets so far in 2015. Stocks, overall, have trailed bonds. The last year that happened was more than three years ago, back in 2011.

Under that backdrop, it make sense that conservative-allocation funds have generally come out ahead of moderate-allocation funds--which, in turn, came out ahead of aggressive funds. The conservative funds tend to have the smallest stakes in equities, while the aggressive ones usually have the most.

When you look at the details, though, there are a few surprises. For example, looking at just the month of August, when news of slowing Chinese economic growth depressed global markets, only three funds out of more than 800 allocation funds had a positive return. One of those was an aggressive-allocation fund. The other two were tactical-allocation funds.

As a group, though, investors in tactical-allocation funds have reason to be disappointed. These are funds that make notable short-term shifts between asset classes, in part to avoid market dips. Year to date through August, though, as a group, they've turned in worse results than the conservative-, moderate-, aggressive-, and world-allocation funds.

One tactical fund that's done better than the rest is BlackRock Multi-Asset Income (BAICX). The fund's focus on income helped limit losses. The rocky markets from this August were a test for the fund's focus on managing risk and volatility. It's good to see that it passed the challenge nicely.

Janet Yang Rohr, CFA does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.