Go-Anywhere Funds That Bail When Markets Crash

Our long-time mutual funds editor Stan Luxenberg has advice for financial advisors on which funds to use when clients get nervous. His point? There are funds which can run to cash — in a BIG way — when the portfolio managers turn bearish. Yes, we all know that many advisors do not like mutual funds that can run from one asset class to another (ruins the FA’s own very careful asset allocation strategy) but “go anywhere” funds are popular among some institutions and gaining some currency (pardon the pun) among retail financial advisors these days. Stan Luxenberg says: “When markets crashed in 2008, many investors were furious with their advisors. Why didn’t you do something to protect us when we needed you? clients asked. Clients believed that advisors should have shifted cash just before the downturn. The desire for a last-minute rescue may be unrealistic, but there are a few funds that do aim to hold more cash when markets sour. Stadion Core Advantage (Ticker: ETFRX) can hold up to 100% in cash. Other funds that sometimes hold cash include Weitz Partners III (Ticker: WPOPX) and Snow Capital. While the funds excel in downturns, they often lag in bull markets. That may leave some clients disappointed, but the funds can provide important diversification.”