Morningstar Advisor - December 2013/January 2014 - (Page 62)
Gray Matters
Family Blind Spots
By Russel Kinnel
A firm's mutual funds tend to share characteristics. Here's how
to diversify a portfolio laden with one family's offerings.
Mutual funds within large fund companies
often share investment traits, and they
sometimes perform in lockstep for good
and bad.
For example, over the summer, PIMCO's bullish
bet on long-term inflation-protected securities
in a bunch of its funds stung investors.
Interest rates rose while inflation expectations
fell, a double whammy for long-term Treasury
Inflation-Protected Securities. It wasn't a
disaster for PIMCO, but it did take a bite out
of a wide swath of its funds.
62 Morningstar Advisor December/January 2014
PIMCO's macro calls such as this one are often
included in a bunch of PIMCO's bond funds.
In addition, PIMCO runs asset-allocation funds
that own a number of its bond funds, so it
affects them, too. It also can have an impact on
stock funds such as PIMCO StocksPLUS
PSTKX, where the strategy is to buy index
futures and try to add value with a fixedincome portfolio held as collateral against
those futures.
The mistimed bet hasn't shaken our faith in
PIMCO because it has had more winning bets
than losing ones over the years. And its TIPS
bet wasn't nearly as scary as Janus'
firmwide Internet bet in 2000. Still, there's
no need for investors to make a firmwide bet
into a bet across their own portfolios, and
this goes for even the best of fund companies.
So, how do you diversify a portfolio heavily
skewed to one fund company? First, look
for the firm's blind spots; then, search for funds
from other companies to fill in the gaps.
Here's a look at the limits that some of the
largest fund companies have and ideas for
funds that would make nice complements to a
Table of Contents for the Digital Edition of Morningstar Advisor - December 2013/January 2014
Morningstar Advisor - December 2013/January 2014
Contents
Contributors
Letter From the Editor
What’s Your Purpose?
Working for Gen Y
How to Allocate College Savings
Mobius Looks to a New Frontier
Investments á la Carte
Investment Briefs
How to Manage Bonds for Today and Tomorrow
Cloud Is the New Engine of Growth
Knowing Where to Look
Economic Vulnerability Varies by Country
Factor Investing in Emerging Markets
Following the Rules
Exploring Indexing’s Next Frontiers
Frequent Fliers
Family Blind Spots
Optimal Portfolios for the Long Run
Finding Value in a Pricey Sector
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
The Emerging-Markets Roller Coaster
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