All Caps vs. Blend funds

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Sep 18, 2008 9:43 pm

I've been in the industry four years now and it was nice coming in prior to 2007.  I like the straight asset allocation model with the 11 plus classes, but occasionally I've dabble into blend funds for the smaller accounts.  My blend funds consisted of large cap and small cap blend funds. 

Now, has anyone ever tried going vertically (i.e. up and down Morningstar's style box)?  I'm thinking instead of the growth and value blend of large and small caps, why not go with all cap growth and all cap value.  Any inputs will be appreciated.

Sep 18, 2008 9:50 pm
gregoron:

I've been in the industry four years now and it was nice coming in prior to 2007.  I like the straight asset allocation model with the 11 plus classes, but occasionally I've dabble into blend funds for the smaller accounts.  My blend funds consisted of large cap and small cap blend funds. 

Now, has anyone ever tried going vertically (i.e. up and down Morningstar's style box)?  I'm thinking instead of the growth and value blend of large and small caps, why not go with all cap growth and all cap value.  Any inputs will be appreciated.

 
Huh?!  Is that the extent of your diversification?
Sep 18, 2008 9:58 pm

No.  Sorry, I didn't elaborate.  Of course I'm only talking about the equity component here.  Fixed income is another story (int/long term, short term, high yield, and foreign bond) for a growth & income model.  My question is for smaller accounts that won't require all 11 asset classes.  Instead of going horizontally on the Morningstar style box with three blend funds (i.e. large, mid-cap, small blend), how would all-cap growth, all-cap value, and all-cap core (if there is any) compare?

Sep 18, 2008 10:04 pm
gregoron:

No.  Sorry, I didn't elaborate.  Of course I'm only talking about the equity component here.  Fixed income is another story (int/long term, short term, high yield, and foreign bond) for a growth & income model.  My question is for smaller accounts that won't require all 11 asset classes.  Instead of going horizontally on the Morningstar style box with three blend funds (i.e. large, mid-cap, small blend), how would all-cap growth, all-cap value, and all-cap core (if there is any) compare?

 
Six to one, half-dozen to the other.  Let me see if I have this right.  Instead of using three funds going one way, you want to use three funds going the other way? 
 
If your percentages come out the same in the style boxes, does it really matter?
Sep 18, 2008 10:12 pm

11 classes?  What am I missing?

Sep 18, 2008 10:33 pm

Actually, I just want to use two (all cap growth and all cap value) instead of three (large, mid, & small blend).  There aren't any all-cap core fund available that I know of.  I think that the percentages will not come out the same since you'd allocate 50/50 of your equity component in the all-cap model vs. 60/30/10 in blends.  The returns would all be in proportion to how much of the funds you own right?  I guess what I'm also trying to find out is if fund managers are more flexible in trading for capitalization than style.

 

Sep 18, 2008 10:45 pm

11 asset classes (Large Growth, LV, MG, MV, SG, SV, Lg. Foreign, I/L Bond, SIB, HYB, FB).  I normally use these for larger accounts.  But, as I said, for smaller accounts I would just use five asset classes like  (Large Blend, MBL, SBL, ILB, SIB).  Now instead of these five, I was thinking of narrowing it down to only four (All Growth, All Value, ILB, SIB).  That was the original question and I just wanted to get feedback if this is feasible or if anyone has tried it.  If not, I will and I'll just let you all know later.

Sep 18, 2008 10:50 pm

I guess I want to see which style is in favor (growth vs. value) and then adjust the allocation to the better one.

Sep 18, 2008 11:03 pm
gregoron:

11 asset classes (Large Growth, LV, MG, MV, SG, SV, Lg. Foreign, I/L Bond, SIB, HYB, FB).  I normally use these for larger accounts.  But, as I said, for smaller accounts I would just use five asset classes like  (Large Blend, MBL, SBL, ILB, SIB).  Now instead of these five, I was thinking of narrowing it down to only four (All Growth, All Value, ILB, SIB).  That was the original question and I just wanted to get feedback if this is feasible or if anyone has tried it.  If not, I will and I'll just let you all know later.

 
SIB?, HYB?, FB?  Please elaborate, I am not good with abbreviations.
Sep 18, 2008 11:05 pm
iceco1d:
snaggletooth:
gregoron:

No.  Sorry, I didn't elaborate.  Of course I'm only talking about the equity component here.  Fixed income is another story (int/long term, short term, high yield, and foreign bond) for a growth & income model.  My question is for smaller accounts that won't require all 11 asset classes.  Instead of going horizontally on the Morningstar style box with three blend funds (i.e. large, mid-cap, small blend), how would all-cap growth, all-cap value, and all-cap core (if there is any) compare?

 
Six to one, half-dozen to the other.  Let me see if I have this right.  Instead of using three funds going one way, you want to use three funds going the other way? 
 
If your percentages come out the same in the style boxes, does it really matter?
 
Snags,

Don't look now...but we are in complete agreement! 
 
However, Primo is still confused...I dunno how long we are going to have to baby him...
 
Really though....3 x 3 = 11 ???
 
Sorry, I rode the little bus.
Sep 18, 2008 11:05 pm

I haven't done my due diligence yet, but I understand that Zack's has a nice all-cap MF that is a clone of their successful SM all-ap strategy.  Check it out and let me know what you think.  The history is in the SM side, but as I recall, they consistently did a nice job of beating the S&P 500.

Sep 18, 2008 11:07 pm
Primo:
gregoron:

11 asset classes (Large Growth, LV, MG, MV, SG, SV, Lg. Foreign, I/L Bond, SIB, HYB, FB).  I normally use these for larger accounts.  But, as I said, for smaller accounts I would just use five asset classes like  (Large Blend, MBL, SBL, ILB, SIB).  Now instead of these five, I was thinking of narrowing it down to only four (All Growth, All Value, ILB, SIB).  That was the original question and I just wanted to get feedback if this is feasible or if anyone has tried it.  If not, I will and I'll just let you all know later.

 
SIB?, HYB?, FB?  Please elaborate, I am not good with abbreviations.
 
Those are bonds.  Short/intermediate, High-yield, and ???
Sep 18, 2008 11:14 pm

Ok, I was going to have a little fun, but others ruined it for me.  Ice makes a great point, small clients should get a nice asset allocation fund, something you can set and forget because you may not get to them during the bad times, at least they should be at the end of the list.  As far as asset classes, you have listed two.  Equities and bonds.  You are confusing styles and market cap with asset classes.  Find a nice all cap asset allocation fund and move on.

Sep 18, 2008 11:25 pm

ILB = intermediate / long-term bond
SIB = short / intermediate bond
HYB = high yield bond
FB = foreign bond

Iceco1d, good point on your last comment if they were strictly "C" clients.  But, I'm talking about smaller accounts that belong to clients with larger accounts, or "C" clients related to "A" clients.  It's not about forecasting skill.  I leave that up to the fund managers who I can hire and fire anytime.  It's still about asset allocation and diversification, but in the fewest funds possible.   So, if I had an all growth, all value, large foreign, and strategic income fund for example, I've covered the bases right?

Besides, I'm only posting this here so I can make more comments to get me off this newbie status.

Sep 18, 2008 11:27 pm

Your question scream newbie though, and I'm not talking about your user profile.

Sep 18, 2008 11:36 pm

May I not burn in hell if I put anyone, even "C" clients, in a target-date fund.  I got burned by those already.  I see your point Primo.  It's just hard to find a good one all cap asset allocation fund.  My two all cap bets are MFS Growth and Lord Abbett All Value.

Sep 18, 2008 11:42 pm

Ha ha.  Newbie is as newbie posts.  Next time I'll hire a professional to ask questions for me like in those Geico commercials.  Wait till you get my next questions.

Sep 18, 2008 11:50 pm

Ice, I meant replacing a fund manager who's not doing well on all cap growth - or value.  I don't expect an all cap growth manager to buy value.  He just has discretion over market cap, not style.  I have discretion to replace that fund with a better performing one, or not reinvest more into it by placing the dividends into cash to buy other funds.  What's the confusion in that? 

Sep 19, 2008 12:05 am

Yes.  There will always be a growth and value component in there but not necessarily in equal amounts - and I'm talking just about differences in dividend redistributions or additional cash contributions.  Ideally though I should just leave these two alone and let them fight it off.

Sep 19, 2008 12:12 am
Indyone:

I haven't done my due diligence yet, but I understand that Zack's has a nice all-cap MF that is a clone of their successful SM all-ap strategy.  Check it out and let me know what you think.  The history is in the SM side, but as I recall, they consistently did a nice job of beating the S&P 500.



You should consider that Zack's also has a retail investment advisory division that competes with you for clients.  Food for thought.

http://www.zackswmg.com/index.php