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Time to think again about balanced funds
Tough times mean a return to funds that cope with bear markets
What is good about these types of funds is that they have some flexibility. The problem with specialist funds is that, if they have a Chinese equity mandate, they must buy stocks in Shanghai, regardless of whether that market looks like a bubble. But the likes of Mr Stewart and Mr Ruffer can act in loco parentis for the investor, switching out of markets they consider overvalued.
Of course, asset allocation is a difficult art. The chances are that managers who are good in bearish conditions will underperform in bullish ones and vice versa. But one of the secrets of long-term investing is the art of avoiding disasters, those 50 per cent hits to the portfolio from which it is almost impossible to recover. Having a cautious fund in the portfolio is a form of protection against such devastating losses.
