Asset allocation funds divide their portfolios among stocks, bonds, cash, and sometimes precious metals with the goal of preserving capital while keeping a hand in certain growth stocks. In 1990, the top-performing asset allocation fund managers emphasized bonds and cash and kept only 30% to 40% of their portfolios in stocks. Many allocation managers who rely on computer models are currently keeping their portfolios more evenly divided among these 3 investment vehicles. For example, Thomas Gunderson, manager of the MIMLIC Asset Allocation Fund, is keeping an asset mix of around 40% stocks, 45% bonds, and 15% cash. He uses computer analysis to compare risk versus return on these 3 vehicles to determine the best asset mix. While asset allocation funds do not produce quick profits, they provide stock market opportunities with less risk and protection from bonds and cash in down markets. Since most funds always hold stocks, there is growth potential on the upside.
Full text: Financial World, Dec 25, 1990
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