Asset Management Funds In Review
by Charles Idol
Many small investors would be grateful for a service that adjusted their portfolio for diversification
and modified the mix to meet the changing financial climate. While money management services have
been available for such services, usually they required a substantial portfolio and charged a hefty fee.
These barriers were hurdled in 1989, when Vanguard and Fidelity, the giants of the mutual fund industry,
among others, introduced money management funds. Enough time has passed to permit evaluation of
their performance. How did they do?
Vanguard calls its money management fund the Asset Allocation Fund, while Fidelity refers to its fund as
the Asset Manager Fund. The funds are similar in more than name: each has a policy of diversification
among stocks, bonds and cash reserves, and each has the objective of solving the difficult problem of
timing. The mix of the fund holdings is adjusted to maximize return and minimize risk by anticipating
market conditions. Fidelity makes these decisions in-house, while Vanguard employs the Mellon Capital
Management Corporation as investment adviser for the fund.
Minimum initial investment is modest for each fund: Vanguard requires $3,000, and Fidelity $2,500.
Subsequent investments may be as little as $100 or $200. Both funds offer automatic reinvestment of
distributions, and both are no load.