When the equity markets began their dramatic slide in the second half of last year, advisers and their clients researched the investment offerings of Los Angeles-based
American Funds more than any other mutual fund group.
According to exclusive data compiled for
InvestmentNews by Chicago-based Morningstar Inc., seven of the 10 most researched funds by advisers in the latter half of 2008 were run by American Funds — led by its mammoth Growth Fund of America. The $111 billion fund had its performance, track record and holdings analyzed by more advisers than any other mutual fund last year, according to data that Morningstar records through its Advisor Tools software.
"During times of extreme uncertainty, a lot of advisers will lose interest in smaller, less proven brands," said John Coumarianos, a Morningstar analyst who covers American Funds. "There's a certain comfort level in resorting to the most frequently used funds."
That may be why the Growth Fund of America ended 2008 with more than $1.6 billion in net new flows — even though it saw outflows of $1.7 billion in October alone.
"When there are so many variables and unknowns in the markets, having a track record that goes back a number of years at least gives you something to go on," said Jonathan Heller, a fee-based planner with Newtown, Pa.-based KEJ Financial Advisors Inc.
To this end, American Funds — as an overall fund group — has generated the kind of steady, long-term performance that is appealing to advisers at the moment. Based on its asset-weighted returns for the past three, five and 10 years ending Dec. 31, American Funds ranked in the top 30% — at least — of its peer group during each time period, according to Morningstar.
Aside from its Growth Fund of America, advisers most frequently researched the $66 billion American Funds Capital Income Builder and the $59 billion American Funds Capital World Growth and Income funds during the last six months of 2008.
Maura Griffin, a spokeswoman for American Funds, did not return a call for comment.
The other fund groups that had offerings cracking the top 10 most researched last year were
Franklin Templeton Investments in San Mateo, Calif., Pacific Investment Management Co. in Newport Beach, Calif., and
Fidelity Investments of Boston.
The $33 billion Franklin Income Fund ranked as the second most researched fund last year, while the $136 billion Pimco Total Return Fund was in the No. 3 spot.
Fidelity's Advisor New Insights Fund ranked as the ninth most frequently researched fund by advisers — and with $7.4 billion in total assets, the five-star Fidelity offering was the only fund in the top 10 with less than $30 billion in assets.
Chris Boruff, president of adviser software at Morningstar, said that his team first began tracking the reports advisers run on specific funds in July, so it's impossible to measure just how atypical the interest in American Funds was in the second half of the year.
While Morningstar doesn't track which funds advisers actually end up investing in, he said the research data offers a glimpse at the strategies advisers are analyzing most when they're modeling portfolios.
It could also show how often advisers are researching the performance of some of their clients' existing fund holdings, or the funds that advisers are screening most frequently when trying to identify up-and-coming funds.
Lately, "clients want to know where to put their money, or what's going on with the funds already in their portfolios," Mr. Boruff said.
That month, after Lehman Brothers Holdings Inc. of New York filed for bankruptcy, American International Group Inc. of New York received its first federal bailout, and
Bank of America Corp. of Charlotte, N.C., acquired Merrill Lynch & Co. Inc. of New York over a short span, advisers increased the number of reports they ran on mutual funds 76% over September 2007.
E-mail Mark Bruno at [email protected].
