It’s not that this is a bad fund. Far from it. It has a great management team at the helm. It is also managed using a disciplined, repeatable process that incorporates a top down analysis to deter-mine the overall asset mix, with fundamentally driven, bottom up security selection.
At the end of June, more than 70% was invested equities, making it one of the more aggressively positioned balanced funds. It is this positioning that is the cause of the funds above average volatility.
Performance has been more than respectable, and it has been able to outpace other funds when markets are rallying. However, it has done a relatively poor job in protecting capital when markets fall, which is a big concern for me as we move forward.
Another area of concern for this fund relates to its cost, which at 2.44% is above the category average. While that may not be an issue in a rising market, it will be a drag on performance if we enter a falling or even flat return environment.
If you hold this fund, I certainly wouldn’t suggest you run for the exits, unless you are uncomfortable with the potential for continued high volatility. I still think that over the long term investors will earn average to above average returns, however, I believe that there are better options available.