The managers of this fund are staying cautious, but have recently added some energy picks to beef up returns, says Russel Kinnel of Morningstar FundInvestor.

Manning & Napier Pro-Blend Extnd Term S (MNBAX) has kept up the pace. This fund uses a flexible approach to asset allocation, staying with a range of 40% to 70% equities.

Senior managers, who average 17 years each at the firm, make asset-allocation shifts based on the firm’s macroeconomic outlook and the investment opportunities found by its equity and fixed-income analysts.

As of January 2013, the fund’s 57% equity stake was right around the moderate-allocation category norm, and just slightly below the fund’s ten-year average. The managers think valuations for the broad equity market aren’t overly appealing given that the economy is in a recovery, so they’ve stayed in the middle range of the fund’s possible equity allocation rather than go higher.

That said, the managers are cautious about certain parts of the fixed-income market. Given low yields, the fund has scaled back its exposure to Treasuries in recent years. They comprised just 8% of the fund’s fixed-income stake as of December, well below the Barclays US Aggregate Bond Index’s 36%.

Despite the managers’ concerns about reinvestment risk, they’ve maintained some exposure to Treasuries to balance the fund’s stake in high-yield bonds, which comprised 13% of fixed-income assets.

On the equity side, the managers have upped the fund’s energy exposure, which weighed on results in 2012. However, the managers think the tight supply-demand picture for oil makes many firms attractive, and added to beaten-up names in 2012 when valuations sank.

The fund’s foray into energy is not unprecedented: The sector was a major driver of returns in the mid-2000s. The managers significantly reduced their energy stake in 2007, a smart move that helped limit losses during the 2007-2009 market meltdown.

While some of the managers’ moves may take time to play out, the fund’s long-term record speaks for itself: its trailing ten- and 15-year returns through mid-February beat more than 90% of peers. Fees could be lower, but it’s a solid choice overall.

The 4-star mid-growth fund has a 9.7% ten-year return and an 8% 15-year return. Its prospectus net expense ratio is 1.15%.

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