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Denning News Shouldn't Detract From American Funds

Capital Group retains its Positive Parent rating, and investors in American Funds should rest assured that their assets are still in good hands.

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A BBC News story posted online on Oct. 21, 2019, has dispelled much, though not all, of the mystery surrounding Mark Denning’s departure from Capital Group. The veteran American Funds investor had left parent company Capital Group about six weeks prior on Sept. 9 for what the firm would only describe at the time as a “personnel decision.” As it turns out, conflicts of interest were at the heart of the matter.

The BBC discovered that Denning, while a portfolio manager on American Funds SMALLCAP World (SMCWX), had invested that strategy’s money for years into Hummingbird Resources, even as his adult daughter became engaged and married to Hummingbird Resources’ CEO Daniel Betts. The portion of SMALLCAP World’s assets invested in Hummingbird Resource was relatively tiny; it peaked at less than 4 basis points in September 2017. It did, however, represent a significant stake in the company, more than 7% of shares outstanding as early as January 27, 2011, per regulatory filings.

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