“Let’s face it - a lot of asset flows do flow to fads,” he said. “We think are a good idea, but we want to see how things play out with them longer-term,” Mr. But with more products available through mutual funds, he said that he is looking closely at them. Fox said.Ĭhris Bray, managing director at Willow Street Advisors LLC, which manages about $240 million, has been skeptical of illiquid hedge-fund-type strategies in particular. Investors and advisers don’t always feel the need to wait for three-year results “because they’re obviously looking at the funds on their own and deciding they want exposure to asset class,” Mr.
“There are investors out there who are amenable to switching out of the tried-and-true to the unproven and new,” said Jeff Tjornehoj, head of Lipper Americas Research, which, like Morningstar, requires three years of performance before rating a fund. Many of these products have come out in the past three years.
Those areas “have been hot overall in the mutual fund world,” he said. Unrated funds include a mix of strategies and asset classes, including various bond funds, foreign-equity funds, commodity-related products, world allocation funds and diversified emerging-markets funds, said Loren Fox, a senior research analyst at fund researcher Strategic Insight. It is in buying these less tested funds, sometimes run by upstart managers, that financial advisers need to tread carefully, observers said. Newer alternative strategies also have been attracting big money. have come out with new products or additional share classes of existing funds which aren’t yet rated but have garnered assets anyway. That is close to what funds with four- and five-star ratings from the fund tracker netted, and more than all lower-rated funds.Ī big part of the reason that new funds have done well is that established players such as American Funds, Fidelity Investments, Pacific Investment Management Co. Unrated mutual funds with track records of less than three years gained $109.5 billion in net inflows over the 12-month period ended March 31, according to Morningstar Inc.
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