This World Stock Fund Should Pull Out of Its Slump
Strong fundamentals--including low fees, an experienced management team, and a proven bottom-up approach--are still intact at American Funds New Perspective.
Strong fundamentals--including low fees, an experienced management team, and a proven bottom-up approach--are still intact at American Funds New Perspective.
Dan Culloton: The Morningstar Fund Medalist of the Week is American Funds New Perspective. This world stock fund has been slumping this year. It's in the bottom 25% of its category this year, and it's been lagging its index--the MSCI All Country World Index--by a handful basis points, largely because of some consumer stock picks like Amazon.com and Home Depot.
We're not that worried about this fund's performance, though, because all of the fundamentals that earned it its [Morningstar Analyst Rating of Gold] are still in place. First of all, it's still very cheap; it's one of the cheapest actively managed funds in its category. Second, it has a very large and experienced management team that is aligned with its shareholders. The average tenure on the team is about 10 years, and the eight managers who run the fund in independent sleeves have about two decades, on average, with the firm. All of them invest very heavily in the firm; more than half of them have close to or more than $1 million in the fund. So, that’s very good.
Most importantly, though, the fund is stuck with its bottom-up, somewhat contrarian growth approach and long-term outlook. So, turnover is very low. They dig into company fundamentals to find growing global franchises that are, for whatever reason, undervalued at the moment. Overall, the fund still has a very strong long-term record as well. It's in the top quartile over 10 years, and most of the managers who earned that 10-year record are still there.
If we had any criticism of the fund, we would say that it lacks a bit of small-cap exposure. For a world stock fund, it's very heavily weighted in large-cap stocks. And it doesn’t have a lot of direct emerging-markets exposure because it is focused on global franchises that sell to the world rather than any one particular region. But, overall, it's a very strong fund that we think will eventually pull out of its slump and deliver strong returns for its shareholders over time.
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