When could it make sense for an advisor to use an asset allocation fund for a client?
Perhaps when advisors want to achieve lower risk through diversification for investors with smaller portfolios. One fund family that has a group of asset allocation funds, MFS Investment Management, celebrated the three-year anniversary for the funds in June, and two of them, the MFS Aggressive Growth Allocation Fund (MAAGX), and MFS Growth Allocation Fund (MAGWX), have achieved Standard & Poor’s five-star ranking for the three years ending June 30th. The MFS Moderate Allocation Fund (MAMAX) received four stars, and MFS Conservative Allocation Fund (MACFX) got three stars for the three-year period.
The allocations are based on Modern Portfolio Theory, and are modeled to match a specific risk profile. Unlike target maturity or lifecycle funds, which modify allocations on a stage-of-life timeline, the MFS funds stay true to their risk classifications, rebalancing daily, so there may be times when it is appropriate to switch from one fund into another if a client’s situation changes.