Last month we purchased Fidelity Limited Term Bond (FJRLX) in our model portfolio. Part of our strat...
FPA Crescent: The Right Balance
06/16/2015 9:00 am EST
This featured fund recommendation is known for its willingness to go against the grain, whether for acceptance of short-term underperformance or willingness to hold cash while waiting for genuine bargains to materialize, explains Genia Turanova, editor of Leeb Income Performance.
FPA Crescent (FPACX) currently holds a very high cash position. Of course, to investors familiar with the FPA Crescent style, high cash shouldn’t be too much out of the ordinary.
Please take note, however, that the high overall percentage of cash among fund assets (more than a third of total assets two years ago, which has steadily increased since) did not prevent it from performing well-above peers.
Also, note that FPA Crescent—being a balanced fund—has held a significant equity portfolio, comparable to that of its peers; over the past three years, equities have consistently represented a little more than half the overall portfolio.
Moreover, unlike most of its peers, FPA Crescent can even short stocks that its managers deem overvalued. Most recently, the fund reported having more than 45% of its total assets in cash and equivalents and short 3.8% in stocks.
While FPA Crescent underperformed peers in 2012 (bottom 21%), it has outperformed in 2010, 2011, 2013, and 2014 (top 47, 13, 6, and 43% of the group, respectively).
Annualized, FPA Crescent’s record puts it in the top 1% of its peers for the last 15-year period, the top 4% of peers for 10 years, the top 17% for the last 5-year period. Steven Romick, who has led the fund since 1993, remains at the helm.
Indeed, the fund’s ability to significantly increase its cash holdings also serves as a way to protect its investors against both volatility and bear market declines, like the one in 2007-09. Given its strong record among balanced peers, we continue to strongly recommend the fund.
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