Morningstar’s Christine Benz recently made the case for the “All-in-One Fund” that has the ability to allocate among multiple asset classes. According to Benz, the most compelling reason to choose such a fund:
Finally-and I’d say this is the key reason why it’s a mistake to avoid all-in-one allocation funds-flexibility can be an important advantage for talented managers who choose to take advantage of it. In a recent column I noodled on what constitutes a core holding, and Morningstar.com users chimed in with their own take on this topic. The mother of all core investments, as one poster argued, is one that has the freedom to go wherever opportunities beckon. [My emphasis added]
One of Benz’s favorite funds in this category is the $40 billion BlackRock Global Allocation Fund (MDLOX.) This value-oriented fund, has generated excellent returns over time. It also happens to only have a correlation of 0.44 to our own “All-in-One Fund”- our Global Macro portfolio. Mixing a good value strategy with a good relative strength strategy may allow you to increase your returns and decrease the volatility as can be seen in the efficient frontier below:
(Click to Enlarge)
A 50/50 mix between the Global Macro strategy and the BlackRock Global Allocation fund resulted in higher returns and less volatility than either of the strategies independently. The S&P 500 only had a 0.29% annualized return over this same time period and had an annual standard deviation of 17.95%.
To receive the brochure for our Global Macro strategy, click here. For information about the Arrow DWA Tactical Fund (DWTFX), click here.
Click here and here for disclosures. Past performance is no guarantee of future returns. Source of returns for MDLOX is Yahoo! Finance.
