American Funds to launch three bond funds in 2013

Company says new offerings not a reaction to heavy stock outflows

Oct 9, 2012 @ 1:20 pm

By Jason Kephart

With the Great Bond-Buying Market going strong for the fourth straight year, American Funds has announced plans to launch three new bond funds in 2013. The proposed funds will cover global investment grade credit, global high yield, and Treasury inflation-protected securities.

Normally, a company's planning new bond funds while investors are busy pouring unprecedented amounts of new cash into the asset class wouldn't raise many eyebrows.

American Funds, however, has long prided itself on its selectivity. From 2000 to 2010, for example, the mutual fund arm of The Capital Group Cos. Inc. launched only three new funds and those more often than not have been in out-of-favor categories, such as emerging markets in 1999.

“They've never been one to launch what's trendy,” said Kevin McDevitt, a mutual fund analyst at Morningstar Inc. “It's very out of character for them.”

The macro backdrop isn't only about bond funds, which have more than doubled their assets to more than $2 trillion since 2008. Actively managed equity funds, the bread and butter at American Funds, have been bond funds' polar opposites, at least in terms of investor withdrawals.

A response to outflows?

Through August, assets in American Funds' equity funds were down to $518 billion, from $619 billion in 2009, even as various stock market measures more than doubled over that time period. Net outflows at the fund firm totaled more than $300 billion over the same time span.

“You have to wonder, with such consistent outflows over three-plus years, if it's not, in some way, a response,” Mr. McDevitt said.

American Funds spokesman Chuck Freadhoff said it's easy to draw the connection between the outflows and the planned bond funds, but that's not the reason the funds are being prepped.

“It's not a matter of market timing. We expect these funds to be around for a very long time,” Mr. Freadhoff said. “We think that there is a place for bonds in everyone's portfolio. Whether in a bull market for equities or not, a well-diversified portfolio includes bonds. Our bond guys have long thought we needed a more complete lineup.”

American Funds will have 10 bond funds after the new funds are launched, five shy of their equity lineup.

The existing bond funds, which have a total of $84 billion in assets, had $603 million inflows through the end of August, compared with $38.8 billion of outflows in the stock funds.

0
Comments

What do you think?

View comments

Recommended for you

Sponsored financial news

Featured video

Events

What's the first thing advisers should do when they get home from a conference?

After attending a financial services conference, advisers can be overwhelmed by options, choices and tools. What's the first thing they should do when they get back to their office?

Latest news & opinion

Is Fidelity competing with retirement plan advisers?

As the Boston-based mutual fund giant expands the products and services it brings to the retirement market, some financial advisers say the firm is encroaching on their turf.

Gun violence hits investment strategies, sparks political debates with advisers

Screening out weapons companies has limited downside.

Whistleblower said to collect $30 million in JPMorgan case

The bank did not properly disclose that it was steering asset-management customers into investments that would be profitable for JPMorgan Chase.

Social Security underpaid 82% of dually entitled widows and widowers

Agency failed to tell survivors that they could switch to a higher retirement benefit later.

If Finra eases firm oversight of outside business activities, broker-dealers could lose revenue

Brokerage firms would no longer be able to charge reps for supervising nonaffiliated RIAs.

X

Hi! Glad you're here and we hope you like all the great work we do here at InvestmentNews. But what we do is expensive and is funded in part by our sponsors. So won't you show our sponsors a little love by whitelisting investmentnews.com? It'll help us continue to serve you.

Yes, show me how to whitelist investmentnews.com

Ad blocker detected. Please whitelist us or give premium a try.

X

Subscribe and Save 60%

Premium Access
Print + Digital

Learn more
Subscribe to Print