What is a Blend Fund
A blend fund is a type of equity mutual fund that includes a mix of value and growth stocks. These funds offer investors diversification among value and growth investments in a single portfolio. Blend funds may also be known as "hybrid funds."
BREAKING DOWN Blend Fund
Blend funds were developed to offer investors the advantages of value and growth investing. Value stocks and value funds seek to profit from undervalued investments identified based on fundamental characteristics. Growth stocks and growth funds seek to profit from companies with substantial potential for capital growth in the form of earnings and capital gains. Blend funds combine both types of investments in a single portfolio.
Investors commonly choose blend funds for their diversification. Portfolio managers typically manage blend funds from a specific investment universe. Often blend funds will focus their investments by capitalization. Therefore, investors can choose to invest in a large-cap, mid-cap or small-cap blend fund.
Investors should seek to clearly understand the allocation determinations of blend funds since they can be managed with various strategies. Generally, blend funds encompass an entire investment universe. Therefore, a blend fund can simply be an index fund which encompasses both growth and value stocks inherently in its compositions. Blend funds may also focus on a combination of capital appreciation, growth and income. Some blend funds may report defined investment allocations such as 40% growth stocks, 40% value stocks and 20% high quality bonds.
Blend Fund Research
It may be difficult to clearly identify blend funds because of the variation in investment strategies of the category. If an investor determines that he or she would like to invest in a blend fund they will typically need to work with an investment advisor or filter for blend funds using an investment resource such as U.S. News and World Reports or Morningstar.
Blend funds are a common category distinguished by fund research providers. Style box investment research was created and popularized to facilitate the identification of funds in various categories for investment such as blend funds.
Style box classifications are very helpful for differentiating investments by objective. A basic style box for stocks contains nine squares. The vertical axis is divided into three categories, which represent company size (large, medium and small) as determined by a fund's market capitalization. The horizontal axis is also divided into three categories based on the stocks in a fund's stock portfolio: value, value/growth blend and growth stocks. Investors seeking diversification to blend funds would choose to filter by stocks in the value/growth blend category.
Blend Fund Investments
Below are two examples of large-cap blend funds in the investment market.
MFS Blended Research Core Equity
The MFS Blended Research Core Equity fund seeks capital appreciation through investment in both growth and value stocks. The fund is benchmarked to the S&P 500 Index.
American Century Core Equity Plus
The American Century Core Equity Plus fund is a blend fund that seeks long-term capital growth. The fund invests in both growth and value stocks with the goal of outperforming the broad U.S. stock market.