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Objective and strategy The fund’s first objective is preservation of capital. Its secondary concerns are to provide income and long-term growth of capital. The fund invests primarily in fixed-income securities. It tilts toward shorter-term, investment grade issues, while having the ability to go elsewhere when the opportunities are compelling. It also invests in foreign and domestic stocks, with a preference for dividend-paying equities. Finally, it may invest a bit in a managed futures strategy as a hedge. In general, though, bonds are 55-85% of the portfolio. In the past five years, stocks have accounted for 25-35% of the portfolio, though they might be about 10% higher or lower if conditions warrant. Adviser Manning & Napier (NYSE: MN ). Manning & Napier was founded in 1970 by Bill Manning and Bill Napier. They’re headquartered near Rochester, NY, with offices in Columbus, OH, Chicago and St. Petersburg. They serve a diversified client base of high-net worth individuals and institutions, including 401(k) plans, pension plans, Taft-Hartley plans, endowments and foundations. It’s a publicly traded company with $43 billion in assets under management. Of that, about $18 billion are in their team-managed mutual funds and the remainder in a series of separately managed accounts. Manager The fund is managed by a seven-person team headed by Jeffrey Herrmann and Marc Tommasi. Both of them have been with the fund since its launch. The same team manages all of Manning & Napier’s Pro-Blend and Target Date funds. Management’s stake in the fund We generally look for funds where the managers have placed a lot of their own money to work beside yours. The managers work as a team on about 10 funds. While few of them have any investment in this particular fund, virtually all have large investments between the various Pro-Blend and Lifestyle funds. Opening date November 1, 1995. Minimum investment $2,000. That is reduced to $25 if you sign up for an automatic monthly investing plan. Expense ratio 0.87% on $1.5 billion in assets as of August 2015. That’s about average for funds of this type. Comments Pro-Blend Conservative offers many of the same attractions as the Vanguard STAR Fund (MUTF: VGSTX ), but does so with a more conservative asset allocation. Here are three arguments on its behalf. First, the fund invests in a way that is broadly diversified and pretty conservative . The portfolio holds something like 200 stocks and 500 bonds, plus a few dozen other holdings. Collectively, those represent perhaps 25 different asset classes. No stock position occupies as much as 1% of the portfolio, and it currently has much less direct foreign investment than its peers. Second, Manning & Napier is very good . The firm does lots of things right, and they’ve been doing it right for a long while. Their funds are all team-managed, which tends to produce more consistent, risk-conscious decisions. Their staff’s bonuses are tied to the firm’s goal of absolute returns, so if investors lose money, the analysts suffer too. The management teams are long-tenured – as with this fund, 20-year stints are not uncommon – and most managers have substantial investments alongside yours. Third, Pro-Blend Conservative works . Their strategy is to make money by not losing money. That helps explain a paradoxical finding: they might make only half as much as the stock market in a good year, but they managed to outperform the stock market over the past 15. Why? Because they haven’t had to dig themselves out of deep holes first. The longer a bull market goes on, the less obvious that advantage is. But once the market turns choppy, it reasserts itself. At the same time, the fund has the ability to become more aggressive when conditions warrant. It just does so carefully. Chris Petrosino, one of the managing directors at Manning, explained it this way: We have the ability to be more aggressive. For us, that’s based on current market conditions, fundamentals, pricing and valuations. It may appear contrarian, but valuations dictate our actions. We use those valuations that we see in various asset classes (not only in equities), as our road map. We use our flexibility to invest where we see opportunities, which means that our portfolio often looks very different than the benchmark. Bottom Line The Pro-Blend Conservative Term Series S Fund has been a fine performer since launch. It has returned over 6% since launch and 5.4% annually over the past 15 years. That’s about 1% per year better than the total stock market and its conservative peers. In general, the fund has managed to make between 4-5% each year; more importantly, it has made money for its investors in 19 of the past 20 years. It is an outstanding first choice for cautious investors. Scalper1 News
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