Fund’s Up-And-Comer Keeps ‘Balance’ : Investing: Since 1985, under Patricia Bannan, Phoenix unit’s assets have soared from $100 million to $3 billion.

If the boom in mutual funds is breeding a generation of reckless investment risk-takers, it’s hard to fault somebody like Patricia Bannan.

As the manager of a fund whose assets have soared from less than $100 million to more than $3 billion since she took the helm in 1985, Bannan very much fits the description of a rising star.

Last year, at the age of 30, she was named to the additional post of president by her employer, Phoenix Investment Counsel Inc.

But a gunslinger she definitely isn’t. The Phoenix Balanced Fund is a conservative type of fund to start with, and she is running it these days in an extra-cautious manner.

“I think we’re at a point where I’m not sure that the average fund investor knows what he or she is buying,” Bannan says. “To that extent I’m nervous.

“The other thing that scares me is that the markets aren’t cheap. Interest rates are very, very low, and it’s just not feasible that the bond market can have the same kind of move it has had.

“The stock market hasn’t had even a 10% correction in more than three years,” she adds. “Since the end of last year we’ve had everything going right, but even then there hasn’t been much upside in the market.

“To me that says that the market is priced to reflect all the good news. At some point I think either the money stops flowing into the markets or maybe it even starts to flow out.”

To prepare for that sort of eventuality, Bannan has built up the fund’s “cash” reserves in short-term money market investments, even though yields on those securities today typically run at a paltry 3% or less.

“We’re worrying about protecting principal,” she says. “Three percent beats negative percent.”

As of mid-November, 28% of the fund was in cash, with 45% in stocks and convertible securities and 27% in bonds, barely above the mandated minimum of 25% for a balanced fund.

A “normal” allocation for the fund, Bannan says, would be 10% cash, 55% stocks and 35% bonds.

This defensive position has come at a price. Through mid-November, Phoenix Balanced showed a total return for the year to date of around 6%, against better than 9% for the typical balanced fund.

“Cash has held us back some,” she says, “but also the fact that our style is out of favor. We buy growth stocks--quality growth stocks--and this year quality and growth have been unpopular.”

Like the shareholders and salespeople who sell the fund (it has a sales charge, or “load,” of 4.75%), Bannan says she is keenly aware of the performance lag. “A lot of the pressure you put on yourself,” she says.

But when the subject comes up, there isn’t any problem answering the question of why the results look that way.

“We’re protecting on the downside,” she says. “The fund hasn’t had a loss in any calendar year since I’ve run it. We don’t like to lose money.”

Thanks to the unusual influence of long, side-by-side bull markets in both stocks and bonds, many balanced funds over the past decade have racked up results that equaled or beat supposedly faster-moving growth stock funds.

It isn’t logical, however, to expect these financial equivalents of four-door sedans to keep performing like sports cars indefinitely.

That isn’t what balanced funds, one of the oldest of all types of mutual funds, were set up to do in the first place. “They are for the relatively conservative investor who wants some participation in the equity market,” Bannan says.

As an individual investor herself, given her youth and business success, Bannan is a logical candidate for more aggressive vehicles. But she says she has some of her own savings invested in Phoenix Balanced.

“By my nature,” she says, “I’m managing a balanced fund because I’m a conservative person.”