Apply now to be an Entrepreneur 360™ company. Let us tell the world your success story. Get Started »
There's nothing sexy about asset allocation. The investment strategy-which means spreading your investment money among stocks, bonds and cash-at first blush sounds, well, boring. Then again, lift the hood on the Value Line Asset Allocation Fund, and you'll find spanky performance and some red-hot tech stocks, too.
The first thing you'll need to understand about the Value Line Asset Allocation Fund is that most of the 200-plus stocks in its portfolio are growth stocks, not value stocks. (A growth stock represents a company that's showing faster than average growth, while a value stock is one where the company's stock is depressed for one reason or another.)
The second thing is that, as of press time, many of the holdings are tech stocks like Cisco and MetroMedia Fiber Network. Which brings us to the third big thing about this fund: the way its assets are allocated changes. "We've been buying stocks since the beginning of the year," says Stephen Grant, lead portfolio manager on the Value Line Asset Allocation fund. "We were only about 37 percent in stocks [at year-end 1999], and now [mid-May 2000] we're about 60 percent in them."
The big leap into stocks in the new century was due to changes in the model that's used to guide Grant and the other two portfolio managers in divvying up the assets in the fund. While the model tells the managers what percentage of assets should be placed in stocks, bonds and cash, Grant and his team are the ones who hand-pick the stocks and bonds for its portfolio.
Currently, the fund has about 40 to 45 percent of its assets invested in equity; 30 percent is in bonds and the remaining 10 percent isin cash.
Although that may sound just like the traditional textbook asset-allocation blend, this fund may have as much as 100 percent of its assets invested in any one class at any given time. Grant says that in 1998, close to 90 per-cent of the fund's assets were invested in stocks.
Throughout the fund's seven-year history, there have been many good times to buy stocks, as its average annual total return reflects. Up more than 22 percent each year, the fund's showing is respectable for any investment.
If there's a downside to the Value Line Asset Allocation Fund going forward, it's likely to be two-fold. First, the great bull market of the 1990s has been growth stock-driven. So, when the tide turns on growth, the fund's model could be challenged.
Secondly, although asset-allocation funds are "conservative" investments, they aren't risk-free. "[The fund is] for conservative investors," says Grant, "but it's not absolutely safe just because it has small-cap and midcap stocks [in the portfolio] and plenty of technology. So it will have some volatility to it."
Dian Vujovich is a nationally syndicated mutual fund columnist and author of 101 Mutual Fund FAQs (Chandler House Press). For free educational mutual fund information, visit her Web site, www.diansfundfreebies.com.
At A Glance
Fund name: Value Line Asset Allocation Fund (VLAAX)
Managed by: Value Line
Portfolio manager: Stephen Grant, lead portfolio manager on a team of three
Total assets: $305 million
Top holdings: GE, Cisco, JDS Uniphase, Mercury Interactive and Wal-Mart
Average annual return: 20.3% (since its inception in 1993)
Maximum load: none
Total expense ratio: 1.08% (including 12b-1 fee)
Minimum initial investment: $1,000
Management fee: 0.65%
Phone: (800) 223-0818
Web site: www.valueline.com
Figures are as of april 30, 2000.