Columbia Management chief investment officer Colin Moore said that in a traditional balanced fund with an allocation of 60% stocks and 40% bonds, stocks can account for nearly 90% of the portfolio’s volatility.
He further explains that Columbia Risk Allocation Fund seeks a different risk/return profile by allocating similar amounts of risk across stocks, fixed income securities and inflation-hedging assets.
The diversified capital allocation of the fund counters the risk of investing in any single asset class, which should allow the Fund to generate attractive returns over time with less risk.
"A growing number of financial advisors have begun to acknowledge that the conventional balanced portfolio is not truly diversified," Moore said.
"Our process seeks to ensure diversification by balancing risk across asset classes that may respond differently under various economic and market environments."
The company claims that the fund has been developed to offer a more consistent investment experience throughout the different phases of the economic cycle, which is quite opposite from traditional balanced portfolios whose outcome is largely determined by the direction of equity markets.
The fund is managed by Todd White (lead PM) and co-managers Anwiti Bahuguna, Fred Copper, CFA, Kent Peterson, and Beth Vanney, CFA.
Columbia Management, a subsidiary of Ameriprise Financial had assets with $344bn under management as of 31 March 2012.
