An Overview of Our Managed Risk Funds | American Funds

An Overview of Our Managed Risk Funds

January 2017

An Overview of Our Managed Risk Funds

We created managed risk funds to help provide investors with some downside protection during declines. For investors who are seeking to manage volatility and are willing to forgo some potential upside in exchange for potentially smoother returns over time, managed risk funds may help their retirement savings last longer.



Managed risk funds can help retirement savings last longer.


A comfortable retirement starts with having enough money to meet essential expenses. That’s why it’s important to have confidence in where you put your hard-earned savings.


Managed risk funds from American Funds strive to reduce the impact of stock market volatility, preserve capital to provide a smoother ride and ultimately help protect your retirement savings.


What if one morning you woke up and the market dropped significantly, like it did in 1987, 2001 or 2008?


Look, we understand that many investors are apprehensive about investing in the stock market. They’re concerned about having enough money to cover expenses during retirement, and for some, that they’ll be able to stay retired.


We believe that people deserve the chance to retire with dignity and the ability to stay comfortably retired.


We all know the stock market’s not static. Downturns of 20% or more have happened about once every 3.5 years. The more you lose, the harder it is to make up.


For example, let’s assume an annuity investor had a $1.2 million nest egg, and was withdrawing $48,000 per year, which would equate to $4,000 every month. If the portfolio declines 20%, the nest egg would decrease by $240,000 dollars. Instead of withdrawing $48,000 every year, the investor would only be taking $38,400. And, to recover from this decline, the portfolio would need to rebound 25%.


Losses hurt. And, market recoveries take time.


Declines can have a major effect on the amount of income that retirees can withdraw every month. What are they willing to give up? Could it be eating out less? Or traveling less? Might it be losing the opportunity to save for their grandkids’ college? 

How can we help annuity investors who aren’t comfortable with stock market volatility? What options are available to help manage exposure during market declines and to help smooth out their retirement journey?


Managed risk funds are designed to help smooth the ups and downs of a turbulent stock market.


At American Funds, we have been building investment portfolios for more than 80 years. And we offer funds with a managed risk strategy, which adjusts the funds’ exposure to stocks when the market is volatile. Let me tell you how.


Do you know what this is? (refers to slide 14) That’s right, it’s a shock absorber


Let’s look at one of our managed risk funds. Here is the underlying American Funds Insurance Series® Asset Allocation Fund. (refers to slide 15) 


There is an added overlay of an actively managed risk strategy. Think of it as wrapping the underlying fund with a shock absorber that is designed to help cushion the blow and potential losses to your portfolio.

To be clear, this overlay strategy is not about timing the market. Our managed risk funds are not designed to predict the future direction of the market. Also, we acknowledge these managed risk funds won’t do as well as the underlying fund in an “up” market, but they’re designed to limit losses when stock prices decline over extended periods. 


While there are no guarantees, we created managed risk funds for investors seeking to manage volatility who would benefit from a measure of downside protection, who are risk averse, who are nearing or in retirement, and who are drawing on retirement income.


Part of American Funds Insurance Series®, managed risk funds are only available within variable annuity contracts issued by many of the nation’s leading insurance companies.


For more information about our managed risk funds, click on the managed risk tab on the American Funds Insurance Series section of our advisor and institutional sites:


Thank you for watching.




Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.

This material is intended for use by financial professionals or in conjunction with the advice of a financial professional.

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing. 

The return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings. Lower rated bonds are subject to greater fluctuations in value and risk of loss of income and principal than higher rated bonds. 

Investing outside the United States involves risks, such as currency fluctuations, periods of illiquidity and price volatility, as more fully described in the prospectus. These risks may be heightened in connection with investments in developing countries. 

Futures contracts may not provide an effective hedge of the underlying securities because changes in the prices of futures contracts may not track those of the securities they are intended to hedge. In addition, the managed risk strategy may not effectively protect the fund from market declines and will limit the fund's participation in market gains. The use of the managed risk strategy could cause the fund's return to lag that of the underlying fund in certain rising market conditions.

Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and not to be comprehensive or to provide advice.