Growth Fund of America saw $12.5B walk in the first half

Already ahead of full-year 2010, when it had $12B in outflows

Jul 18, 2011 @ 2:28 pm

By Jessica Toonkel

Investors are continuing to flee American Funds' offerings. Three funds from the group, a favorite of advisers, made the top five in most outflows for the first half of the year, according to Morningstar Inc.

The $156.8 billion Growth Fund of America Ticker:(AGTHX) led the way with $12.47 billion in net outflows during the first half of the year, compared with $12 billion for all of 2010.

The $33.2 billion American Funds Bond Fund of America saw the second-highest net outflows during that period, with $4.267 billion. The $81.8 billion American Funds Capital World Growth & Income Fund Ticker:(CWGIX) saw $3.73 billion in outflows, placing it fifth on the list.

Fidelity Investments and Pacific Investment Management Co. both had one fund among the top five in outflows.

Fidelity's $32 billion Diversified International Fund Ticker:(FDIVX) was third, with $4.24 billion in outflows, and Pimco's $242.8 billion Total Return Fund Ticker:(PTTAX) came in fourth, with $3.74 billion in outflows.

American, which is advised by Capital Research and Management Co. and sold through intermediaries, has been suffering from massive outflows since the market crash of 2008. But the difference now is that the 2008 market crash doesn't show up in the funds' three-year performance anymore, yet Growth Fund of America's three-year track record still ranks it among the third quartile of its peers, said Russel Kinnel, director of mutual fund research at Morningstar.

Growth Fund of America has returned 2.80% on an annualized basis over the past three years, underperforming its category by 1.94 percentage points, according to Morningstar. Similarly the American Funds Bond Fund of America Ticker:(ABNDX) has returned 4.60% over the same period, underperforming its peers by 2.4 percentage points and placing it among the bottom 10% for its category, according to Morningstar. The $81.8 billion American Funds Capital World Growth & Income Fund has an annualized three-year return of 2.48%, underperforming its category by 1.44 percentage points.

“I think the story is that there is continued disappointment with the performance of these two funds,” Mr. Kinnel said. “Performance has been subpar.”

Maura Griffin, a Capital Research spokeswoman, declined to comment on the funds' outflows. Mark Porterfield, a Pimco spokesman, had not returned a call and e-mail by press time. Sophie Launay, a Fidelity spokeswoman, declined to comment on the outflows.

There are many other funds in the large-cap-growth category that have better performance, said Steve Johnson, a financial adviser with Raymond James Financial Services Inc., who is switching clients out of the fund.

Mr. Johnson is moving client assets from Growth Fund of America into other funds, including T. Rowe Price Inc.'s New America Growth Fund Ticker:(PRWAX) and American Funds' AMCAP Fund Ticker:(AMXPX), both which have better performance, he said.

“There are just a lot of smaller funds with better performance,” Mr. Johnson said.

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