Go Worldwide With T. Rowe Price Global Allocation

This one-stop fund provides instant diversification.

T. Rowe Price logo
(Image credit: Courtesy of T. Rowe Price)

Building a diversified portfolio is a snap with a world allocation fund. These funds, including T. Rowe Price Global Allocation (RPGAX (opens in new tab)), invest in a mix of stocks and bonds across the globe.

"We view the fund as a core holding," says Charles Shriver, one of the fund's two managers. "It's a one-stop shop."

Shriver and his co-manager, Toby Thompson, make the big-picture calls of how to position the portfolio. They start with a target of 60% U.S. and foreign stocks, 29% U.S. and foreign bonds, and 11% alternative investments, then tilt the fund toward certain asset classes – large- versus small-company stocks, say, or growth versus value, or emerging-markets versus developed-world stocks or bonds – depending on their view of the world.

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The managers leave the bond and stock selection to the firm's specialists and a deep bench of research analysts. Alphabet (GOOGL (opens in new tab)), Amazon.com (AMZN (opens in new tab)) and Microsoft (MSFT (opens in new tab)) are the fund’s biggest stock holdings; short- and long-term Treasuries are its biggest bond positions. For small stakes in certain asset classes, Shriver and Thompson may invest in another fund. "In floating-rate loans, for example, a fund offers instant, broad diversification and liquidity," says Shriver.

Chart of world allocation funds

(Image credit: As of April 9, 2021. r Redemption fee. SOURCES: ICE Data Services, Morningstar, Vanguard.)

The system has worked well. Over the past five years, the fund has returned 10.8% annualized, which beat 93% of world allocation funds. In every full calendar year since its launch in mid-2013, the fund's returns have ranked among the top third or better of its peers.

The fund's alternatives segment consists of a hedge fund of funds run by asset management firm Blackstone (7% of assets at the end of 2020) and a stake in T. Rowe Price Dynamic Global Bond fund (4% of assets), which has a flexible investment mandate. The bond fund is a low-volatility diversifier, says Shriver. "In a rising-rate environment, traditional bonds may not be as defensive as they have been historically."

For now, Shriver says the fund has a "modest underweight" position in stocks – 54% of assets – with 33% in bonds and the rest in alternatives and cash. The managers have balanced that with floating-rate loans, which will benefit from rising rates, and short-term inflation-protected securities as a hedge against in­flation.

Nellie S. Huang
Senior Associate Editor, Kiplinger's Personal Finance

Nellie joined Kiplinger in August 2011 after a seven-year stint in Hong Kong. There, she worked for the Wall Street Journal Asia, where as lifestyle editor, she launched and edited Scene Asia, an online guide to food, wine, entertainment and the arts in Asia. Prior to that, she was an editor at Weekend Journal, the Friday lifestyle section of the Wall Street Journal Asia. Kiplinger isn't Nellie's first foray into personal finance: She has also worked at SmartMoney (rising from fact-checker to senior writer), and she was a senior editor at Money.