Morningstar Advisor - April/May 2011 - (Page 54)

Undiscovered Managers Balancing Act By Rob Wherry There’s no actual pot of gold at the end of James Balanced: Golden Rainbow, but long-term investors aren’t seeing their money disappear, either. There is good reason why James Balanced: Golden Rainbow GLRBX isn’t on most investors’ radar screens. To meet the managers, investors would have to travel on rural roads that cut though cornfields about 45 minutes outside of Dayton, Ohio. Eventually, they would come upon the rustic timber headquarters of James Advantage Funds, the parent of Golden Rainbow, tucked into the tree line outside the community of Alpha, Ohio. It’s worth the trek. The fund is in the top decile of the conservative-allocation category over the trailing five-, 10-, and 15-year time periods. And although it has performed well in down markets—typical of balanced funds— it has also done a solid job of keeping up with the market during rallies. The fund captured just 48% of the market’s losses the past decade, while capturing 73% of its upside. By comparison, the fund’s peer group captured 67% of the downside and 68% of the market’s gains during that time period. Over the past decade, “you saw funds that hit their peaks, and then they got crushed,” says Bob Feighan, an advisor with Ameriprise, based in Westchester County, N.Y. “I am not looking to outperform the market with this fund, but I am also not looking to lose my clients’ principal.” Small-Cap Momentum Tilt A look under the hood of the fund explains that track record. It typically keeps 50% of its assets in high-quality bonds—nothing surprising there. But on the equity side, the fund invests almost 60% of its assets in small- and mid-cap stocks; the category 54 Morningstar Advisor April/May 2011

Table of Contents for the Digital Edition of Morningstar Advisor - April/May 2011

Morningstar Advisor - April/May 2011
Letter From the Editor
The Debate That Matters Most
What Can the Mutual Fund Industry Do Better?
Cool Logic, Warm Intent
How to Start a Mutual Fund
Owner and Operator
Middle East Revolts Roil Oil Markets
Four Picks for the Present
Investment Briefs
How We Improve Our Odds of Picking Outperformers
Health Care Survived 2010, but Investors Want Proof
The Global Fund-Leadership Playoffs: Europe vs. the United States
U.S. Fund Investors Have It Good
U.S. Fund Firms Learn to Speak UCITS
Balancing Act
The Tamer Ride
Investors Lend a Hand
Healthy, Wealthy, and Wide
Foreign Funds That Win at Concentration
Mutual Fund Analyst Picks
50 Most Popular ETFs
Undervalued Stocks With Wide Moats
VAs Finish 2010 With a Solid Gain
Buying Good Funds, Poorly

Morningstar Advisor - April/May 2011