This Balanced Fund Remains Strong Despite Manager Changes

Key Morningstar Metrics for American Funds American Balanced

• Morningstar Medalist Rating: Bronze
• Process Pillar: Above Average
• People Pillar: Above Average
• Parent Pillar: High

Although a number of its managers have retired in recent years, American Funds American Balanced ABALX retains substantial talent and an appealing approach.

Change has been the watchword for this strategy’s manager lineup. On May 1, 2024, lead principal investment officer Jeff Lager left before retiring, and another manager, Anne-Marie Peterson, stepped off to focus on other portfolios. Effectively taking their place were Irfan Furniturewala and Mathews Cherian, both disclosed as managers on April 1, 2024. Another manager, Paul Benjamin, took on Lager’s lead PIO duties, such as making the occasional tactical shift and overseeing the portfolio.

The strategy absorbed this turnover without much issue, just as it had three prior manager departures since late 2020. Benjamin has been deeply involved with this portfolio for well over a decade, first as the coordinator of its analyst-run research portfolio and then as a manager since 2014. And both Furniturewala and Cherian have substantial previous experience with equity-income mandates similar to this one.

The supporting team is impressively resourced. The equity group supporting this strategy is backed by dozens of analysts with plenty of experience pursuing a growth-and-income mandate such as this one; the managers aim to at least match the yield of the S&P 500. The fixed-income effort is also appealing, as that team’s process has become more disciplined in recent years, and the firm has brought in proven personnel to bolster the group. At this strategy, the team aims to offset equity volatility while adding value through security selection. Asset-allocation moves, directed by the lead PIO after discussions with the rest of the team, have been rare but generally additive. In early 2020, for example, equities were cut to 60% from 65% as valuations appeared stretched; the US fund’s A shares held up better than its typical moderate allocation Morningstar Category peer and the Morningstar US Moderate Target Allocation Index in the ensuing sharp downturn. In 2022’s downturn, allocation shifts didn’t have much impact, but savvy stock selection helped the fund lose less than its typical peer. These combined efforts have helped the US fund surpass that index, 90% of peers, and a 60/40 blend of the S&P 500 and the Bloomberg US Aggregate Bond Index (which is appropriate given the heavy emphasis on US securities) in the trailing 15 years ended April 2025.

Performance Highlights

This strategy’s record is impressive. Over the trailing three-, five-, 10-, and 15-year periods through April 2025, the US fund’s A shares surpassed most of its moderate-allocation category peers as well as the category benchmark, the Morningstar US Moderate Target Allocation Index, on total returns as well as Sharpe ratio (a measure of risk-adjusted performance). The fund has had a mixed record versus its internal benchmark (60% S&P 500/40% Aggregate Index), lagging it over the past 10 years but topping that hard-to-beat benchmark over 15 years, while roughly matching it over three and five years. The collective investment trust, launched in 2019, is virtually identical and is off to a strong start versus category peers and benchmarks. The Japan-domiciled portfolio, which is also a near-clone, opened in late 2023.

Security selection has been the primary driver of outperformance versus peers and the benchmark. A heavy stake in mega-cap stocks in recent years has also provided a strong tailwind, along with investing less in non-US stocks than the category average. Management occasionally makes asset-allocation moves that have often proved timely. For example, cutting equities to 60% very early in 2020 when stocks’ valuations appeared lofty helped the strategy lose a bit less than the category index in the sharp downturn of February and March. The conservative fixed-income portfolio, which eschews high-yield debt, has typically provided ballast in such declines.