Our Approach | American Funds

  • INVESTMENT OPTIONS
  • LATEST INSIGHTS
  • PRACTICE EXCELLENCE CENTER

Our Approach

< >

The Capital System℠

With each investment offering, Capital Group begins by defining a clear investment objective and assembling a diverse team best equipped to pursue the universe of opportunities available.

The Capital System is designed to enable individual investment professionals to act on their highest convictions, while limiting the risk associated with isolated decision-making.

Funds and strategies using The Capital System are divided into portions that are managed independently by investment professionals with diverse backgrounds, ages and investment approaches.

Example: International Equity management team



 


Portfolio management team as of December 31, 2016

ValueProp_2016update_imageA

The Complete Process

Investment analysts representing a variety of geographic regions and sector concentrations follow the universe of investment opportunities identified in the investment offering.

vp_capsys_stop2-1

Pool of analyst coverage

The Complete Process

Portfolio managers — and, notably, analysts* as well — are assigned a portion, or sleeve, of the overall investment offering to manage independently, enabling them to focus on their highest conviction ideas.

* In most portfolios

vp_capsys_stop3-1

Highest conviction ideas

The Complete Process

The Capital System bears some resemblance to a team approach. But there’s an important difference: While there may be group discussions, there are no group decisions.

ValueProp_2016update_imageB

The Complete Process

Overall portfolios are composed of individual managers’ and analysts’ highest conviction investment ideas. Combining the best independent decisions of experienced investment professionals into one portfolio results in diversification and creates the potential for superior results over time.

vp_capsys_stop5-1

The Complete Process

The end result is a diversified portfolio composed of individual managers’ and analysts’ highest conviction investment ideas. Combining the experienced managers’ best independent decisions that are consistent with the investment offering’s specific objectives delivers a portfolio with the potential for superior results over time.

vp_capsys_stop6-1

Diversified portfolio

For illustrative purposes only. In funds with research portfolios, analysts invest directly in a limited number of the companies they cover.

vp_capsys_stop7-1

Governance 

Multiple layers of oversight contribute to rigorous risk controls

A multilayered governance structure oversees the system, enabling managers to act with confidence while managing their sleeve for optimum long-term results.

vp_capsys_stop8-1

Governance

Managers & analysts

Managers and analysts share information and opinions with their colleagues and challenge each other’s decisions.

vp_capsys_stop9-1

Governance

Principal investment officer

Accountable for:

     • Overall objectives and yield targets

     • Guiding risk management and distribution of assets among managers

Portfolio Coordinating Group

Group of senior executives at Capital accountable for:

     • Portfolio manager lineup and succession planning

     • Monitoring portfolio manager results

Fund board (for mutual funds only)

Independent trustees accountable for:

     • Holding management responsible for results

     • Setting fees and renewing contracts

Built to Last

As a private firm with an independent charter and robust balance sheet, we are able to invest in our capabilities through all markets, both good and bad. Our investment professionals are among the most experienced in the industry.

Experience over cycles defines our stability

     • Our portfolio managers average 27 years of experience,         including 21 years at our company.

     • The average portfolio manager tenure for the American           Funds is 9 years; for the industry, it’s 6.3 years.*

Why it matters:

Generations of knowledge over multiple full market cycles provides our clients an experience advantage.

*Source: Morningstar®, as of December 31, 2016.
Portfolio manager and analyst data as of December 31, 2016.
The Capital Group companies manage 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.

“In consulting and industry circles, stability of management is often considered the best measure of investment culture. ...Creating a healthy culture where very skilled and sought after investment professionals want to stay for their whole career is one of the hardest things to do in the money management world.”

– Morningstar®, September 2012

31%

of our portfolio managers experienced the October 1987 crash

 

68%

of our fixed income portfolio managers experienced the difficult 1994 bond market

 

As of December 31, 2016

100%

of our portfolio managers have more than 10 years of investment experience

Aligned With Investor Success

We base our decisions on a long-term perspective, which we believe aligns our goals with the interests of our clients. Achieving superior, long-term returns is our only goal, so managers are rewarded for their results, not the level of assets they manage. Collectively, Capital Group associates are significant investors in the company’s investment offerings.

A Long-Term Perspective on Behalf of Clients

IS01-Image

Average holding periods as of the most recent fiscal year-end periods available through December 31, 2016.
Source for comparable equity funds: Lipper.
* For the American Funds only, as of December 31, 2016.

Our investment philosophy is based on doing what we believe is right for clients:

We reward long-term results
Compensation paid to our investment professionals is heavily influenced by investment results over one-, three-, five- and eight-year periods. Increasing weight is placed on each successive measurement period to encourage a long-term investment approach.

We invest alongside you
Collectively, Capital Group associates are significant investors in the company’s investment offerings.

Why it matters:

Our interests are deeply intertwined with those of clients.

Compensation paid to our investment professionals is heavily influenced by investment results over one-, three-, five- and eight-year periods. Increasing weight is placed on each successive measurement period to encourage a long-term investment approach.
vp_align_stop2-1
vp_built2-1
The Capital System℠ >

The Capital System combines individual accountability with teamwork. Funds using The Capital System are divided into portions that are managed independently by investment professionals with diverse backgrounds, ages and investment approaches. An extensive global research effort is the backbone of our system.

 

Built to Last >

As a private firm with an independent charter and robust balance sheet, we invest in improving our capabilities through good markets and bad. We have some of the most experienced investment professionals, a deep bench and a commitment to sustaining our investment process over generations.

Aligned With Investor Success

We base our decisions on a long-term perspective, which we believe aligns our goals with the interests of our clients. Our portfolio managers average 27 years of investment experience, including 21 years at our company, reflecting a career commitment to our long term approach.1

 


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

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. 

Content contained herein is not intended to serve as impartial investment or fiduciary advice. The content has been developed by Capital Group, which receives fees for managing, distributing and/or servicing its investments.

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.