Morningstar Advisor - February/March 2013 - (Page 60)

Gray Matters Exhibit 2 Asset Class Exposures for BlackRock Global Allocation Fund January 1996 to December 2011 % of Total Allocation Cash US Bond Non-US Bond US Equity Non-US Equity Perf Stock Conv Bond Other 100 80 60 40 The degree to which managers made changes to their portfolios varied by fund. Some funds exhibited significant changes over the period tested. For example, BlackRock Global Allocation Fund MBLOX had significant allocations to cash (more than 20%) in the early 2000s yet had almost no cash in December 2011 (Exhibit 2). The fund’s equity allocation varied significantly, too (Exhibit 3). 20 01/1996 01/1998 01/2000 01/2002 01/2004 01/2006 01/2008 01/2010 Exhibit 3 Equity Allocation of Blackrock Global Allocation Fund January 1996 to December 2011 Equity Jan-96 % Allocation Jan-98 Jan-00 Jan-02 Jan-04 Jan-10 Average Equity Allocation BlackRock Global Jan-06 Equity Allocation Jan-08 100 80 60 40 20 12/1995 12/1997 12/1999 12/2001 12/2003 12/2005 12/2007 12/2009 Exhibit 4 Percentage of Mutual Funds that Outperformed SevenProxy Benchmarks % 70 Rolling 12-Month Average Dec-95 Dec-97 Dec-99 Dec-01 Dec-03 Dec-05 Dec-07 S&P 500 Dec-09 65 S&P 500 1800 1600 1400 1200 60 1000 55 800 600 50 400 45 200 12/1996 11/1998 10/2000 09/2002 08/2004 07/2006 06/2008 05/2010 Aug-04 Jul-06 Jun-08 May-10 60 Morningstar Advisor February/March 2013 Dec-96 Nov-98 Oct-00 Sep-02 does not necessarily mean that tactical decisions will end up adding value for clients, because clients only realize the benefits of these decisions after paying the costs associated with the strategy. For the purposes of this analysis, these costs are assumed to be zero; therefore, our study is a test of whether balanced mutual fund managers have been able to exhibit skill versus determining if they are skilled enough to do so to cover their fees. In the analysis, we only included U.S. open-end mutual funds in the conservative allocation, moderate allocation, aggressive allocation, and world allocation categories. We excluded index funds and enhanced index funds. For those mutual funds with multiple share classes, the oldest share class was used. The analysis period begins in January 1996 because it is the year that Morningstar introduced its categories. While Morningstar categories are used to define the mutual fund test population, the actual calculations are based entirely on the underlying asset-class exposures, based on the rescaled long allocation to the respective asset class. Therefore, the categories were only used to identify those mutual funds that have exposures to both stocks and bonds, versus being entirely bond-focused or equity-focused. In the analysis, we reviewed two different structural portfolio components. The first test is based on the breakdown between three asset class proxies: cash, bond, and equity. The second test uses a more granular set of seven asset-class proxies: cash, U.S. bond, nonU.S. bond, U.S. equity, non-U.S. equity, preferred stock, and convertible bond. The

Table of Contents for the Digital Edition of Morningstar Advisor - February/March 2013

Morningstar Advisor - February/March 2013
Contents
Contributors
Letter From the Editor
Social Media, the Old- Fashioned Way
Do You Use Active Strategies?
Youth Appeal
How to Buy the Unloved 2013
Morningstar Managers of the Year
Investments á la Carte
Investment Briefs
Approaches to Absolute-Return Investing
In Agriculture, It’s Good to Be Strong
Yes, There Are Good Active Funds
The Decoupling
Where It Could Pay to Be Active
The Active Fund That Defies Obsolescence
The Epitome of an Active Manager
Lines of Communication
The Existence of Market Timing ‘Intelligence’
A Route to Commodities that Bypasses the Futures Market
Best Positioned for Health-Care Reform
Diversified Stock Funds That Earn Their Stars
Our Favorite Mutual Funds
50 Most-Popular Equity ETFs
Undervalued Stocks With Wide Moats
A Twisted Debate

Morningstar Advisor - February/March 2013