Are Asset Allocation Funds a Good Deal?

“Investors woke up to the benefits of diversification in the down market of 2000-2002, and that’s why we’ve seen so much interest in these types of portfolios,” says Joseph Flaherty, the portfolio manager at MFS who developed and manages these funds to provide investors with “easy access to broadly diversified, professionally managed asset allocation portfolios.” Some advisors use the funds in a “core-satellite approach” placing the bulk of a client’s portfolio in the asset allocation fund that matches their risk profile. Advisors add value “by layering on other asset classes or funds that they may favor,” according to Flaherty. “It allows them to express things tactically and it allows the bulk of their portfolio to have that rebalancing process.”