80-Year-Old Funds to Survive Wars, Depressions

BOSTON ( TheStreet) -- Who do you want at the wheel of your ship in a hurricane when you're a mutual fund investor?

The hotshot with the yacht-club pedigree, white duck pants, cravat and the hat to match? Or the guy who's been around the world a few times, and quietly displays his confidence and can back it up with double-digit returns that go back a decade?

The answer should be clear by now: the steady, experienced hand with nothing to prove.

Here are three funds cited by Standard & Poor's as giving a series of market storms a run and have proven their skills over the decades. Their managers oversee "blended" mutual funds. That is, they invest across different asset classes. The funds offer investors the potential for capital appreciation, from the equities in the portfolio, as well as current income from the bonds, a combination that fits well in these turbulent times.

"The market turmoil in the past couple of years might make investors long for a fund that has navigated through these waters before," S&P analyst Dylan Cathers said in a research report Monday.

The three funds that he highlights have been investing in stocks and bonds for over 70 years. "They have been around the proverbial block more than once, and we believe are worthy of consideration by investors looking for a growth-oriented blended mutual fund."

He told TheStreet in an interview that, while stock funds have seen big redemptions, these blended funds haven't. They're meant to be a building block for a portfolio to provide all-weather security, "sort of a safe harbor." They're more conservative, so you wouldn't necessarily want them as the whole of your portfolio.

Vanguard Wellington Fund ( VWELX) has been around since four months before the Great Depression in 1929. The $57 billion fund (across all classes) has a 15-year annualized return of just under 8%, putting it in the top 7% in its large-blend category. It's down 2.1% this year versus the S&P 500 Index's 6.6% decline.

The fund holds 667 securities in its portfolio, with stocks accounting for two-thirds of assets. The rest is bonds.

Vanguard Wellington has a 12-month yield of 2.75%, which is more than 100 basis points above the peer group's average of 1.67%.

Furthermore, the portfolio receives a positive score for S&P Stars, suggesting that S&P Equity Analysts have, on average, a favorable view of the fund's holdings.

Its top two holdings are Exxon Mobil ( XOM) and AT&T ( T).

In its rating, S&P says it looks highly upon its managers' relatively long tenures -- lead manager Edward Boussa since 2000 -- and as is typically the case with Vanguard funds, its costs are well below peers. The net expense ratio is 0.3% versus 1.04% for the category average, and it has no sales load.

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American Funds Balanced Fund ( ABALX), now with $51 billion in assets, began operations in September 1932. Over the past 10 years, it has outdistanced its peers by over 110 basis points annually. American Funds Balanced Fund has also outperformed over the trailing one- and three-year periods.

The average credit quality of the fund's holdings is high, earning it a positive mark in S&P's methodology. The fund's expense ratio is a below-peer 0.63%, and its turnover of 37% compares favorably to the average of 55%. It also carries a 2.05% yield.

The mutual fund has a team of seven managers, and the oldest, John Smet, has been there since 1997. Its biggest holdings are two international oil companies, Chevron ( CVX) and Royal Dutch Shell ( RDS.X). This year the fund is down 1.2%


T. Rowe Price Balanced Fund ( RPBAX), which opened in 1939, oversees $3.2 billion in assets. The fund has an annual yield of 2.18%. Its asset allocation is similar to its peers, with 65% recently in stocks and 33% in bonds, including a 4.5% weighting in a high-yield fixed-income mutual fund.

T. Rowe Price Balanced Fund has a 15-year average annualized return of 6.5%, but is down 2.5% this year.

Edmund Notzon, III, has been a manager of the fund for over 20 years. On the strength of its below-average net expense ratio and lack of a sales load, the fund receives a positive cost factor score, according to S&P.

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Disclosure: TheStreet's editorial policy prohibits staff editors and reporters from holding positions in any individual stocks.

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