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Fund Spy

Lifting the Curtain on Changes at American Funds Bond Fund of America

Recent changes to this fund's portfolio manager structure shows much tinkering going on.

Mentioned:

 American Funds Bond Fund of America (ABNDX) has transformed itself in recent years. While we've been following these changes closely--disappointing results in 2008 caused the firm to strategically shift away from corporate bonds toward more government-backed offerings--the fund's recently released prospectus, as well as meet­ings with the team, has shed new light on just how they've been going about it.

First, some background: Longtime investors and observers may recall that for much of its history, BFA tended to lean more toward credit-sensitive and corporate fare than many of its peers. Until 2007, corporate and high-yield bonds often made up about two thirds of the portfolio, with mortgages and government bonds taking up the balance. That focus on corporate bonds was a natural outgrowth of the firm's equity research and its emphasis on bottom-up, fundamental company research. After all, corpo­rate bonds are just another rung on a company's capital structure.

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