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Friday, June 14, 2002

New Fido Funds Pulling In Assets

by: Sean Hanna, Editor in Chief

Will asset allocation funds finally take root? During the bull run these funds failed to become the core holdings that many expected them to be as investors believed they could better pick investments on their own. Investors also favored less diversified funds in the hope of realizing above market returns.

The bear mood may be shaking up that thinking though. Fidelity Investments reports that its series of four "structured funds" have taken in more than $1 billion of new money since their November introduction. The fact was revealed in the firm's June Mutual Fund Guide, a publication for Fidelity retail clients.

The four funds are actively managed to a target asset allocation and are a take-off on the approach that defined benefit plans take to investing their assets. Each fund has a target allocation to a number of asset classes. Those allocations can drift from the target by only two percent. Within the asset classes the funds are actively managed.

The four funds are: Structured Large Cap Growth, Structured Large Cap Value, Structured Mid Cap Growth, and Structured Mid-Cap Value. The first of the funds was launched November 15 of last year and the last just last May 31.

If investors start to accept this type of fund (also known as a life style or target allocation fund at some shops) distributors may be able to use them to solve the advice problem. Distributors can focus on picking the best subadvisors for the funds and creating the reputation of the product.  

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