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Fund Spy

American Funds American Balanced: Have Manager Changes Knocked This Fund Off Balance?

Several of the fund's experienced managers have retired. Here's what that means for fundholders.

Mentioned:

A strong equity operation and a compelling fixed-income effort support a continued Morningstar Analyst Rating of Silver for the 13 cheapest share classes of American Funds American Balanced. The other six share classes are still rated Bronze.

This fund saw a number of highly experienced portfolio managers retire in recent years: three in roughly a six-month period from October 2020 through March 2021, and a total of seven since late 2015. But the remaining 10 managers, who each run their own slices of the fund, boast a wealth of experience managing portfolios, and there have been no changes since March 2021. New lead principal investment officer Jeff Lager, who will make tactical asset-allocation calls on occasion, has run funds since 2004, and the other nine managers have steered portfolios since at least 2014. Further changes are possible in the near future, as three managers are in their 60s, but none have announced plans to retire, and the fund has a bench of undisclosed managers, some of whom may soon take on more-significant pieces of the fund.

The firm’s most prominent strength is equity research. The equity group supporting this fund is backed by dozens of analysts and has generated impressive results. Asset-allocation moves have also been a boost here. In early 2020, equities were cut to 60% from 65% as valuations appeared stretched; the fund held up better than its typical allocation—50% to 70% equity Morningstar Category peer and the reference benchmark, the Morningstar Moderate Target Risk Index, in the ensuing sharp downturn. Also, directing the majority of new inflows to the fixed-income managers in 2021, even as stocks rose sharply, has led to limited losses in early 2022’s equity market dip. Such shifts have helped the fund surpass that index and 85% of peers in the trailing 15 years ended February 2022.

The fund has long held up well in declines, as the managers focus on higher-rated bond fare to offset equity volatility. The fixed-income manager lineup has seen substantial changes since a misstep in the 2007-09 bear market, and the three current managers joined the fund within the past six years.

Key Proprietary Morningstar Metrics

Morningstar Analyst Rating: Silver
Process Pillar: Above Average
People Pillar: Above Average
Parent Pillar: High

Greg Carlson does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.