Although some folks in the financial advisor community may have taken a slight credibility hit during the financial crisis, these professionals remain an important link in the investment chain for scores of individuals. And while conflicts of interest remain rife in many corners of the industry, many investors rely on the guidance of their advisor, either in part or completely. So exactly what investments have advisors been sweet on lately?
According to data from Morningstar, which tracks the number of times advisors use their Morningstar Advisor Workstations look up certain fund tickers, there were a handful of funds that advisors tended to research the most in 2010. Now, that's not a guarantee that advisors recommended those funds with the same frequency, but it does give us insight into what advisors are thinking, and how they may be investing client assets.
Let's take a look at the top 10 researched funds of last year, and examine whether advisors are on the right page, or missing the mark.
Playing favorites
One thing is for sure -- advisors seem to love American Funds. Four funds from the company's lineup made it on to the Top 10 list. These include American Funds EuroPacific Growth (AEPGX) at the No. 9 spot, American Funds Capital Income Builder (CAIBX) at No. 6, American Funds Capital World Growth and Income (CWGIX) with the No. 5 ranking, and American Funds Growth Fund of America (AGTHX) clocking in at No. 3. All in all, I can't quibble with these funds too much. Capital Research & Management, who manages all of the American Funds, has a solid history of investing success and a long-standing tradition of developing talent to run their portfolios. I think investors would do well with any of these four funds in their appropriate roles.
But while all four funds are solid options, one of my favorites here is Growth Fund of America. The fund looks for companies that offer superior long-term growth prospects, and currently outranks 96% of its peers over the past decade and a half. Recent performance hasn't been as impressive, but I think the fund is well-positioned to take advantage of the next leg of market leadership. The fund leans heavily into technology names, and it's currently favoring low- or reasonably-priced tech blue chips such as Apple
The global village
Clearly, global strategies were high on advisors' minds last year -- especially multi-asset global funds with mandates that allow management wide latitude in selecting investments. Two funds that land in this category are Ivy Asset Strategy (WASAX) and Black Rock Global Allocation (MDLOX). Both funds look across the globe for attractive opportunities, and both can invest in stocks, bonds, and other asset classes like derivatives, in some cases. Both funds currently have exposure to gold, including the BlackRock fund's 2% allocation to SPDR Gold Shares
For investors looking for a go-anywhere global option, either fund would probably fit the bill. Expenses are reasonable. Both funds have managed to amass pretty decent track records, although the Ivy fund does tend to turn over its holdings more frequently and has been in the spotlight with respect to its possible role in last May's "flash crash." If you want to keep a lid on risk, I'd suggest going with the BlackRock fund, but either option would probably suffice for investors who are willing to ride out some bumps in the road.
One other foreign fund favorite on the top 10 list is Oppenheimer Developing Markets (ODMAX), which claims the No. 8 spot. Although the current manager has only been on board for four years, in that time the fund has more than doubled the return of the average diversified emerging-markets fund. Companies headquartered in Brazil, such as Petroleo Brasileiro
Bond-ing strategies
Perhaps it's not surprising to see bond funds still strongly represented on the list of most researched funds, given stock market volatility as of late. Templeton Global Bond (TPINX) claims the No. 2 spot on our list while the vaunted Pimco Total Return (PTTAX) lands the No. 1 honor. Rounding out the list at No. 10 is Franklin Income (FKINX), a conservative allocation fund that also devotes about a third of fund assets to stocks.
Templeton Global Bond is safely one of the best funds in the world bond category, suitable for bond investors with more risk tolerance. Bill Gross' legendary prowess has made Pimco Total Return the most popular bond fund around, and while the fund's asset base has swollen, I think investors can continue to invest with confidence here. Likewise, Franklin Income ranks in the top 3% of all conservative allocation funds over the past 15 years and would make a solid choice for more risk-averse investors. All in all, advisors' choice of bond funds seems pretty solid.
Ultimately, I was glad to see a range of broad-market, well-diversified funds on the list of top 10 most researched funds. There is a notable lack of sector-focused funds, precious metals funds, or outrageously expensive options, all good things for financial advisor clientele. Furthermore, all of these funds are fairly solid options, with no glaring or obvious shortcomings. Now we can only hope that advisors are recommending these funds to clients with the same zeal that they are researching them with.
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