Can balanced funds keep working?
The challenge for balanced funds going forward, though, comes from the multiple threats that the financial markets currently face. Although interest rates have already come well off their lows, putting additional pressure on the income component of balanced funds — for example, one unleveraged long-term Treasury ETF has lost more than 22% so far this year — many believe that inflationary pressures and huge increases in monetary supply resulting from massive budget deficits have already spelled an end to the decades-long bull market in bonds. The funds above have used different methods to tackle that threat. Wellington has lengthened maturities and moved toward riskier corporate debt. Greenspring is also buying risky debt, but mostly with short maturities, and maintains a 20% cash position. Janus and Oakmark both focus on intermediate-term bonds, but while Janus has a varied mix of high-quality debt and riskier corporate issues, Oakmark has stuck with predominantly AAA-quality bonds.
