CTFAX (or for those of us who are grandfathered by Columbia, COTZX) has always struck me as fund designed by marketers. It does a good job at asset allocation (5* rating among "mostly bond" funds), but that seems almost incidental.
If you were a marketer designing an "automated" asset allocation fund that could be sold using nothing but a simple metaphor, you might come up with something like a thermostat. Just as point spreads are used to simplify gambling (replacing more complex odds), the thermostat presents the same over/under 50:50 simplicity. But it ain't no way to run a fund.
To go with the metaphor, a fund is a climate control system, not just temperature control. You've got humidity, air flow, lighting (direct/indirect), etc. And they all interact. The fund sells itself as automatic, but only the stock/bond allocation is automatic.
What's the mix among stock funds? Bond funds? This is left entirely up to the management, with no restrictions - just that the fund offers participation in the equity markets and preservation and income in the bond markets. So this is an asset allocation fund run by a few simple rules, except when it's not - large cap vs. small cap, foreign vs. domestic, junk vs. investment grade, long term vs. short, etc.
A thermostat is designed to keep a constant temperature, say 72 degrees. But that's not what we want of an investment. We expect stocks to go up over time. The prospectus does say that the management will reset the target "temperature" from time to time (typically annually). At least that's good.
The fund is supposed to make "prompt" allocation changes when the S&P index passes pre-specified values in either direction (going up or going down). This can lead to churning, especially in markets that are moving in a narrow range (that just happens to be crisscrossing a threshold). That's just the type of market that this fund is supposed to thrive in (according to the prospectus).
The fund has a 31 day trade restriction. If the stock allocation has increased within the past 31 days, it won't sell stocks (to avoid the possibility of a wash sale). This does have the effect of reducing the worst of the whipsawing, but it doesn't eliminate it.
There's not a great reason for this 31 day rule. As most people here know, if you want to avoid a wash sale but maintain a position, you just use a comparable holding. Instead of Acorn, use Acorn Select. Instead of Columbia Contrarian Core, use Columbia Enhanced Core. The wash sale risk is manageable, if fund management is willing to take it on.
The fund offers no concept of a "neutral" target allocation (i.e. what to expect if the market has a "typical" year). So there's no indication how the threshold values are set each year. Or even if the fund is intended to be as conservative as it's been over the past three years (in 2012 it held 44% of assets in equity).
My main issue with the fund is that its design says to me that the fund isn't doing what it is marketed to do. The prospectus makes a big deal of it not being run by subjective managers, yet both the allocations among the funds (as opposed to between stocks and bonds) are done by managers on a daily basis, and the creation of the stock/bond allocation table is subjective (no algorithm is suggested).
It is also marketed as a fund that should work well in a narrow trading range (as opposed to a market that is going straight up). But the allocation rules/triggers and exceptions seem too mechanical to prevent churning that's inherent in simple systems.
As to the performance - that's good. M* gives it 5 stars, if one ignores the load (typically waived). It's done quite well over its lifetime.
