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Fund Spy

Capital Group, Part I: Still Relevant After All These Years

The active manager's investment results, fixed-income improvements, and industry leadership stand out.

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In an environment in which active managers face fee and performance pressures from passive options, Capital Group, the parent of American Funds, remains as relevant as ever. That's the conclusion drawn from Morningstar's ongoing stewardship evaluation of Capital Group, which included a recent visit with firm leadership. This Fund Spy, the first of two, highlights some of Capital Group's key strengths, while also noting ways the firm could serve investors even better, including taking a closer look at its own capacity limits. The second installment will investigate the issue of capacity.

A Competitive Equity Lineup
With roots tracing to 1931, the firm has become the biggest active asset manager in the United States by delivering strong investment results over full market cycles, often because of its equity funds' resilience in downturns. Their early 2018 showing is in keeping with this long-held pattern. Indeed, when the S&P 500 dropped 10.1% in nine trading days between Jan. 29 and Feb. 8, each of the firm's seven domestic-equity funds lost less, ranging from 36 to 163 fewer basis points. Performance like that helps explain the lineup's competitive record over the past 20 years, a period that includes numerous corrections as well as the 2000-02 dot-com bear market, when most American Funds' offerings distinguished themselves, and the 2007-09 credit crisis, when the lineup had less success but still held up relatively well.

Alec Lucas has a position in the following securities mentioned above: RWMFX. Find out about Morningstar’s editorial policies.