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Do Objectives-Based Funds Deliver?

The results haven't matched the hype for objectives-based funds.


Objectives-based investing has moved to the asset-management industry's fore in recent years, but the results haven't matched the hype. In our recently released report, we reviewed over 1,000 distinct multiasset funds to identify strategies aiming to provide what investors most commonly seek from objectives-based portfolios: income, target returns, volatility protection, and inflation protection. A healthy number of funds accomplish their objective, though comparable blended indexes would do the same and usually with higher returns and lower volatility. Instead, the markers of worthy objectives-based investments are similar to those of other strong funds, and we indicate them through our Morningstar Analyst Ratings.

Background: Financial-Planning Origins
We use the term "objectives-based" to describe funds that seek to address a specific investor preference or problem, which is in contrast to a more traditionally oriented strategy that seeks to provide exposure to a certain asset class; they're also sometimes referred to as "goals-based," "outcomes-based," or "solutions-based" investing.

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