First, we select the top trending category from more than 200 categories listed on MutualFunds.com based on the percentage increase in monthly viewership. From the top trending category, we select the top three funds with the highest one-year trailing total returns. To ensure the quality and staying power of funds, we only look at those mutual funds with a minimum of $250 million in assets and a track record of at least one year. We also remove those mutual funds that are closed to new investors and are not available for investment outside registered accounts such as retirement or 529 accounts.
In this week’s edition, we analyze the top three U.S. Conservative Allocation Funds. These funds tend to allocate assets in a conservative manner with above average percentages of bonds and cash.
Bond prices have moved sharply higher since the Great Recession—apart from a series of taper tantrums and other one-off events—as central banks have struggled to reach inflation targets. With massive COVID-19 stimulus on the table, the market is growing concerned about rising inflation and bond prices have taken a hit in recent weeks. Conservative allocation funds aim to provide investors with exposure to fixed income while mitigating inflation risk.
Our breakdown of each fund includes key aspects, such as one-year performance, fund expenses, investment style, and management teams, to give you an overview of how these funds hold up against their peers.
Be sure to check out the U.S. Conservative Allocation Funds page to find out more about other funds in this category as well.
1. Columbia Income Builder Fund (RBBAX)
The top fund in our list this week is the Columbia Income Builder Fund (RBBAX). It has an 11.73% trailing one-year return with a 0.38% net expense ratio, which is lower than the category average.
As a fund of funds, the fund’s strategy is to invest in other mutual funds and exchange-traded funds (ETFs) with target allocations of 0% to 35% in equity, 55% to 100% in fixed income, 0% to 15% in cash, and 0% to 20% in alternative investments.
The fund is co-managed by Colin Lundgren, CFA, Global Head of Fixed Income at Columbia Threadneedle Investments, and Gene Tannuzzo, CFA, a Senior Portfolio Manager and Deputy Global Head of Fixed Income at Columbia Threadneedle Investments. Both managers have a tenure of more than a decade.
The fund’s portfolio holds 17 different funds with diverse holdings across financial services (19%), real estate (16%), technology (14%), and industrials (12%). The leveraged portfolio is primarily concentrated in bonds (88%) and equities (20%). The largest holdings are the Columbia Quality Income Fund (18%), the Columbia Corporate Income Fund (14%), the Columbia High Yield Bond Fund (12%), and the Columbia Mortgage Opportunities Fund (10%).
Learn more about different portfolio management concepts here.
2. PIMCO Inflation Response Multi-Asset Fund (PZRMX)
The number two fund on our list this week is the PIMCO Inflation Response Multi-Asset Fund (PZRMX). The fund delivered a solid 11.24% one-year trailing return with a net expense ratio of 1.41%, which is higher than the category average but still well below the category high.
The fund’s strategy is to invest in a combination of fixed income investments of varying maturities, equity securities, and derivatives with a focus on mitigating the negative effects of inflation. Notably, up to 25% of its total assets may be invested in equity securities.
The fund is managed by a relatively young team that includes Managing Directors Nicholas Johnson and Stephen Rodosky and Senior VP and Portfolio Manager Daniel He. With tenures of six years and one year, respectively, the team’s tenure rank is at the low end for the category.
The fund’s leveraged portfolio consists of 574 assets, including 70% bonds and 30% stocks, concentrated in real estate (89%). The largest holdings by value are in two-year Euro-Schatz Futures, which are interest rate futures contracts, a notional German government note, given the recent rise in U.S. inflation expectations.
Find out about the funds suitable for your portfolio by using our free Screener.
3. Fidelity Asset Manager® 30% Fund (FTANX)
The third place on the list belongs to the Fidelity Asset Manager 30% Fund (FTANX). The fund generated a robust 11.05% one-year trailing return with a modest 0.52% expense ratio that puts it in the middle of the pack.
The fund’s strategy is to invest in stocks, bonds, and short-term money market assets to maximize current income. As its name implies, the fund may invest 15% to 30% of its total assets in equities along with 50% in bonds and 20% in short-term and money market instruments.
The fund is co-managed by Geoffrey Stein, a portfolio manager with a nearly 12-year tenure, and Avishek Hazrachoudhury, a quantitative analyst and portfolio manager who started in April 2018.
The fund’s portfolio consists of 3,753 assets that include bonds (51%), stocks (33%), and cash (12%). These assets are diversified across many different sectors, including technology (23%), healthcare (13%), financial services (13%), consumer cyclical (12%), and communication services (10%). The fund’s portfolio also holds just over 12% international equities.
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The Bottom Line
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Note: Data as of February 26, 2021.