For the first time in seven years, advisers allocated more money to American Funds than they withdrew for two consecutive quarters, according to Morningstar Inc. data released Monday.
Advisers added $5.9 billion of client money into American Funds over the six months ended Mar. 31. It's the first successful half-year sales effort for the firm since 2008, when investors added $21.3 billion shortly before the financial crisis wiped away billions.
The figures show stamina behind sales of the No. 3 mutual fund brand by assets, sold to investors by third-party financial advisers. For years the Capital Group Cos. Inc.-owned company has struggled to meet the needs of advisers paid fees by investors rather than sales commissions, and to navigate the trend of index-based investing.
The firm is still facing multibillion-dollar outflows in major funds, like its Capital World Growth & Income Fund (CWGIX) and the Growth Fund of America (AGTHX), which combined lost $10 billion over the last year, according to Morningstar. But the firm has managed to stimulate demand for a set of other investment strategies. Twenty-four of its 34 funds attracted more assets that investors withdrew over the last year.
Newer funds, such as the Global Balanced Fund (GBLAX) and the International Growth and Income Fund (IGAAX), are among the winners. Those funds took in $6.2 billion over the last year, according to Morningstar.
Investors have been supporting some active-management strategies focused on more specialized categories, like international investing, and asset-allocating strategies that cover both stocks and bonds, according to Todd Rosenbluth, director of ETF and mutual fund research at S&P Capital IQ.
“We've had a really strong U.S. equity market for the last six years and investors are diversifying away from just traditional U.S. equity products,” Mr. Rosenbluth said, noting a particular interest in Europe, whose financial markets are seen as a potential beneficiary of aggressive central-bank monetary policy. “In fixed income, we've seen strong inflows from the industry toward active to start the year.”
ACTIVE MANAGEMENT
American Funds has expanded by a quarter its field force of wholesalers, who sell funds to advisers. And it has
more aggressively pushed an argument in support of active management.
As Vanguard Group Inc. became the undisputed leader in mutual funds, with $2.4 trillion in mutual fund assets, much of it tracking indexes, American Funds lost the top spot in the mutual fund business and dropped to third. The firm mostly employs portfolio managers who attempt to beat benchmarks, rather than simply copy them.
American Funds, with $1.2 trillion, now sits behind Vanguard and Fidelity Investments,
another firm grappling with the “passive” investing trend, in that ranking.
Where Vanguard met the movement of advisers to business models increasingly based on charging fees directly to clients, in part with low cost, sales-charge-free exchange-traded funds, American Funds didn't successfully replace the outflows in its “load” funds with sales into other products that don't pay advisers commissions. And some advisers found themselves
disappointed with the funds' performance during the financial crisis.
American Funds lost $251 billion to redemptions from 2008 to 2013. To put that in perspective, the amount of money taken out of the funds during that period are larger than all the assets in BlackRock Inc. mutual funds today.
