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I'm going to discuss an increasingly rare breed: funds that are netting inflows. With the markets getting pummeled, not many funds are drawing investor interest.
Because you may well be considering one of these funds as something of a haven in rocky times, I'll run through the 10 with the greatest inflows in dollar terms for the first half of 2008. To be clear from the outset, none of these funds is a true haven.
Most have lost less than their peers in this market -- and I'd expect that most would do so in most down markets -- but these are all long-term funds that are likely to lose money anyway when their respective markets tank.
Pimco Total Return Institutional
Net inflows of $14 billion, or 13% of assets.Bill Gross and his team at the Pimco Total Return Institutional (PTTRX) fund made a brilliant call that the housing bubble would burst and interest rates would fall as the effects knocked down numerous dominos in the economy. For the biggest bond fund in the world to be well-positioned and help protect its legion of investors is heartening. Gross still makes mistakes, but this is a fine long-term holding.
Individual investors are better off with Managers Fremont Bond (MBDFX) or Harbor Bond (HABDX), which are virtual clones of the Pimco fund and charge the little guy less.
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Vanguard Total Stock Market Index
Net inflows of $9 billion, or 9%.The Vanguard Total Stock Market Index (VTSMX) fund is getting its inflows mainly via Vanguard's target-date funds. Obviously, an index fund that tracks the market will go down exactly the same amount as the market, so it's no haven -- though I would add that index funds rarely end up in the bottom quartile during a bear market. I like seeing a boring low-cost index fund on a best-seller list like this. Be patient with such funds and you'll be rewarded.
Ivy Asset Strategy A
Inflows of $6.8 billion, or 81% of assets, at the beginning of the year.Wow. Ivy Asset Strategy (WASAX) is a very bold fund that's been on the money of late. Last year a big bet on BRICs (Brazil, Russia, India and China) paid off handsomely. That should have sunk the fund this year, but it made huge short bets against the U.S. and Europe. So the fund is about flat for the year to date.
Be prepared for the occasional nasty pothole when the managers' timing is off, but hats off to the great track record they've built.
Vanguard Total Bond Index
Inflows of $6.2 billion, or 11%.You can apply everything I wrote for Total Stock Market to Vanguard Total Bond Index (VBMFX), only insert the word "bonds" for "stocks."
BlackRock Global Allocation
Inflows of $6.2 billion, or 26% of assets.BlackRock Global Allocation (MDLOX) was a Fund Analyst Pick long before it became the flavor of the month. Denis Stattman isn't as bold as the Ivy Asset managers, but he does make big top-down bets.
Stattman made a small bet against the Russell 2000 this year, and he sold some bank stocks early in the year. Those weren't on the scale of the Ivy fund's moves, but they worked like a charm. Stattman is approaching his 20th anniversary on the fund, so he makes a good case for why you can trust him with those moves.
4 from American Funds
Inflows between $4 billion and $4.9 billion.The four are Capital World Growth & Income (CWGIX), Growth Fund of America (AGTHX), Fundamental Investors (ANCFX) and Capital Income Builder (CAIBX).
American is a great way to go in shaky times. Its excellent fundamental research and diversification provide some downside protection, but, more importantly, they enable the funds to earn solid returns when the markets rally. If you're a load-fund investor, these are all worth considering.
Harbor International
Inflows of $3.9 billion, or 12%.Haken Castegren, our 2007 International-Stock Fund Manager of the Year, is having a fine follow-up to a great 2007.
Castegren and the team from Northern Cross trimmed their winning positions in Chinese stocks late last year but held on to some big natural-resources stocks such as Petrobras (PZE, news, msgs). If your time horizon is greater than 10 years, this venerable fund is an excellent pick.
This article was reported and written by Russel Kinnel for Morningstar.
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