2 Balanced Funds That Take the Edge Off Volatility
Bronze-rated MFS Total Return and MFS Global Total Return both should deliver over time.
Madeline Hume: Investors looking for a more balanced approach to the market in light of recent volatility should consider one of MFS's moderate allocation funds.
MFS Total Return and MFS Global Total Return both have 60% equity and 40% bond allocations, but there are key differences in where and how they invest. MFS Total Return typically invests most of its assets in the U.S. The equity portion has three strategies run by separate teams: two that invest in value stocks and one that invests in dividend-paying stocks. The bond sleeve hews closely to the Bloomberg Barclays US Aggregate Bond index, but with a slight tilt toward lower quality investment-grade bonds.
MFS Global Total Return, as its name suggests, takes a more global approach to investing and typically holds at least 50% of its assets in securities outside the U.S. Its value bias is not as pronounced as MFS Total Return, given that it only has one sleeve with a value strategy rather than two. The bond sleeve is managed to the Bloomberg Barclays Global Aggregate Bond Index, which holds more in lower-quality issuers than the US Aggregate does.
The distinctions between these two funds have caused performance differences. MFS Global Total Return has been a bumpier ride for investors, owing to its international and lower-quality bias, but we expect both of these Bronze-rated funds to deliver over the long term.
Because of its global reach, Global Total Return charges higher fees than Total Return does, but they also fall into different Morningstar categories. Total Return's expense ratio of 0.73% in its A share class is lower than Global Total Return's 1.09%, but both stack up as below average against their peers.
Madeline Hume does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.