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Emerging-Markets Focus a Plus for American Funds New World

Emerging-Markets Focus a Plus for American Funds New World

Alec Lucas: American Funds New World is the only diversified emerging-markets fund with a Morningstar Analyst Rating of Gold. It uses American's signature multimanager system, dividing the fund's asset base into separately run sleeves. In this case, eight equity managers, one balanced manager (tasked to buy stocks and bonds), and one fixed-income manager tap emerging-markets' growth through a revenue-centric approach. As long as a firm gets at least 20% of its revenues or profits from the developing world, it's fair game here--provided that at least 35% of the fund's assets are invested directly in emerging-markets securities.

That makes for an interesting portfolio, and New World’s March 2019 asset mix was typical. It had a 4.5% bond stake in international bonds with revenues from emerging markets, 8% in cash, and the rest in an equity portfolio split roughly evenly between emerging-markets-domiciled companies and developed-market multinationals like top-five holding Alphabet. Alphabet profits from the growth of internet usage in developing countries like India, which means it meets the fund’s revenue requirements. Resiliency in downturns has been a key to this fund’s long-term success. It's beaten the benchmark over the trailing 12 years through March 2019.

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About the Author

Alec Lucas

Director of Manager Research
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Alec Lucas is director of manager research, active funds research, for Morningstar Research Services LLC, a wholly owned subsidiary of Morningstar, Inc. He is a voting member of the Morningstar Medalist Ratings Committee for U.S. and international fixed-income strategies, covers fixed-income strategies from asset managers such as Baird and American Funds.

Lucas is also active in parent research. He is a voting member of the U.S. parent ratings committee and previously served as the lead analyst for Franklin Templeton, Capital Group, and Vanguard, among other firms.

Lucas was a strategist on Morningstar's equity strategies team prior to assuming his current role in June 2022. He covered equity strategies from asset managers such as Primecap and American Funds and received the 2019 Citywire Professional Buyer Rising Star Award.

Before joining Morningstar in 2013, Lucas worked as a minister as well as a professor for Loyola University Chicago, among other institutions. From 2010 to 2011, he was a Fulbright Scholar at the University of Heidelberg.

Lucas holds bachelor's degrees in philosophy and classics from the University of Missouri-Columbia, where he graduated summa cum laude and with departmental honors, and a Master of Divinity, summa cum laude, from Trinity International University. He also holds a doctorate in theology, with distinction, from Loyola University Chicago and has published several articles and one book within that field.

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