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Four decades of investing with Gordon Crawford

Speaker:
Gordon Crawford
Title:
Portfolio manager
Based in:
Los Angeles
Investment experience:
41

Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Fund results are for Class A shares and reflect deduction of maximum sales charge (5.75% for equity funds). For current information and month-end results, visit americanfunds.com.}

WILL MCKENNA: The Growth Fund of America® is probably the fund that you’re most associated with. Would love to hear your perspective on what it was like managing from the formative years of that fund to where it is today as one of the industry’s biggest funds — and what that journey was like.

GORDON CRAWFORD: It’s been an amazing journey. I love Growth Fund of America. It is a truly great fund. People that look at it today don’t realize where Growth Fund of America came from. We took over control of GFA on December 1, 1973. It had $12 million of assets — 12 million, not billion — and a $16 million tax-loss carry-forward. So it had a carry-forward that was bigger than its asset base.

And the track record from December 1, 1973, for the next — well, really, for the life of the fund, as controlled by Capital, has been truly remarkable. It obviously had a great run in the bull market from 1982 to 1999. I was looking at it the other day, and of course, part of it was just a great bull market.

But what really put GFA on the map was the year 2000. In 1999 GFA was up — I’m talking calendar years now — it was up, I want to say, 45%. So it was a great year. We had a lot of tech in it. And for a big fund at the time — a 20 or $30 billion fund — we did kind of an amazing pivot and we sold a lot of tech, went very defensive, raised a lot of cash. And so in the calendar year 2000, GFA ended up 7% in a year that the S&P was down over 9% and the average Lipper multi-cap growth fund was down 12%.

So it was extraordinary. And as a result of that — even though the next two years were down, as with everybody else — GFA, basically, went from a $30 billion fund to a $200 billion fund at its peak. And then 2008/2009 came along, and I think our shareholders were very disappointed at GFA’s results in that down market — understandably so. We were not happy with it.

Basically, it went down what the market went down. And that’s after people watched us in 2000 be up 7 in a down-9 market. It was like, “What happened?” The big difference that I think people misunderstand is that it’s not that we were a $200 billion fund; it’s not that the system was broken; it’s not that anything that we do has changed. It was simply the fact that [in] that 2008/2009 market, every single group went down around what the market went down. It was a total, across-the-board wipeout. And unless you had cash, there was really nowhere to hide.

In 2000 you could sell tech, telecom and media and be in defensives, and you could stock-pick your way out of a down market. What we’re really good at is when you get a very overvalued group, we tend to get out of them. And so when the down market comes, the group that’s getting punished the most, we get out of. You couldn’t stock-pick your way out of ’08/’09.

So people were very disappointed; we were very disappointed. So now everybody believes that there’s something broke at GFA, and there’s not, you know? We’re having a great year this year, and I still believe this is a great fund. It’s got a great group of managers. It has a very broad mandate, because we think of it as a capital-appreciation fund. I’ve got a lot of my own personal money in it, and I think it’s going to be a great fund for years to come.

Here are The Growth Fund of America’s average annual total returns for Class A shares with all distributions reinvested for periods ended September 30, 2012:                                                                                                                             

1 year 5 years 10 years Expense ratio*
20.57% -1.12% 8.08% 0.68%
*As of the fund’s prospectus available at the time of publication.

Figures shown are past results for Class A shares and are not predictive of results in future periods. Current and future results may be lower or higher than those shown. Share prices and returns will vary, so investors may lose money. Investing for short periods makes losses more likely. Fund results are for Class A shares and reflect deduction of maximum sales charge (5.75% for equity funds). For current information and month-end results, visit americanfunds.com.


Past results are not predictive of results in future periods.

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

Investing outside the U.S. involves additional 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.

Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed-income investment professionals provide fixed-income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups. 

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 statements included here are the opinions and beliefs of the speaker(s) expressed at the time the commentary was recorded and are not intended to represent those persons’ opinions and beliefs at any other time.