Only a handful of these funds existed before the financial crisis. The granddaddy of them all is BlackRock’s $56-billion Global Asset Allocation Fund (MDLOX), in existence since 1989. The $28-billion Ivy Asset Strategy fund, started in 1995, is often compared with the BlackRock offering.
Both are multi-asset allocation funds with a flexible investment approach. The BlackRock fund invests in more than 700 securities across domestic and international stocks, bonds, hybrid securities, and exchange traded funds. The fund has a deep bench management team of 40 professionals.
The Ivy fund can invest from zero to 100 percent in any asset class globally. Its portfolio consists of stocks, fixed income, gold and cash “with the goal of delivering equity-like returns with less equity market risk,” according to a recent Morningstar report. Waddell & Reed is the fund’s parent.
Both have shifted assets recently to meet changing market conditions, but their essential strategies remain intact, according to Morningstar.
Another high-profile global allocation fund and relative “old timer” is the $14 billion Thornburg Investment Income Builder Fund (TIBAX), founded in 2002.
The Innealta Country Rotator Fund represents the new breed of fast-growing entrants in this sphere. The Innealta Country Rotator Fund has grown to $1.4 billion in assets since inception four years ago.
Jeff Montgomery, CEO of Innealta Capital Inc. in Austin, Tex., believes modern portfolio theory died with the financial crisis. He maintains the rise in global allocation funds and tactical investment management has coincided with the rise in the popularity of exchange-traded funds (ETFs).
“Investment managers looking for yield and growth don’t want to be constrained to one country, and therefore have expanded their investment universe globally,” said Montgomery. “Being limited to one country also increases risk.”
Not everyone is enthused about the category. Larry Luxenberg, a financial advisor at Lexington Avenue Capital Management, says, “These (funds) are similar to global macro hedge funds. It’s certainly desirable to invest globally and in certain investment classes, but it's best for an individual investor or advisor to set the allocation for that individual’s vehicle.”
Before investing in these funds, advisors and investors are urged to use caution and do careful research. Managing these funds can be a challenge, requiring competent, experienced management teams to keep an eye on numerous global investment trends, says Morningstar.