Mutual Funds Try to Calm Nervous Investors

By Mark Jewell, AP Personal Finance Writer

BOSTON (AP) — Stocks are up sharply, yet the mutual fund industry is still bracing for a worst-case scenario.

A driving force behind many of this year's fund launches is fear and how investors can face up to it. More than a dozen new funds are specifically designed to protect against risks like inflation, a market crash, and excessive volatility.

But this year's crop of new funds is about more than just easing anxiety. Two top fund companies are venturing outside their comfort zones — the world's biggest bond shop is trying its hand at stock-picking, and a star stock picker is venturing into bonds.

Nearly 7,700 mutual funds already compete for your investment dollars, so make sure a new fund really stands out before jumping in.

Some seize on investor interest in recently hot strategies whose days may be numbered. Plus, there's no track record to scrutinize.

"The burden of proof is definitely on a new fund to prove it's worth it," says Morningstar analyst Dan Culloton.

What's more, there aren't as many new funds as usual to choose from. Morningstar counts 56 through late April, putting launches far behind the pace of the past few years.

Here's a look at some of the year's more noteworthy launches:

INFLATION FIGHTERS: Rising prices will erode purchasing power and undercut a retirement portfolio. Or, for the fund industry, inflation can create a market opportunity. Seven new funds either have inflation in their name, or explicitly seek to limit inflation risk through investments like Treasury inflation-protected securities. Some also invest in commodities or other assets that typically fare well when consumer prices rise.

This group includes three funds from AllianceBernstein: Multi-Asset Inflation Strategy (AMTAX), Bond Inflation Strategy (ABNAX), and Municipal Bond Inflation Strategy (AUNAX). Another two are from Eaton Vance: Commodity Strategy (EACSX) and Short Term Real Return (EARRX). Others include Principal Diversified Real Asset (PRDAX) and Legg Mason Strategic Real Return (LRRAX).

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