The vision of Capital Income Builder | Capital Group Canada | Insights


VIDEOS  |  October 2018

The vision of Capital Income Builder

Jim Lovelace, principal investment officer and a portfolio manager of Capital Income Builder, discusses how his father created the mandate more than 30 years ago in the U.S. to meet the needs of charitable foundations.


Apu Sikri: Can you tell us about the origins of Capital Income Builder and how the strategy came about?

Jim Lovelace: We launched the strategy in 1987. It was a concept of John Lovelace, my father. Specifically the idea that he had was to create an investment program that use stocks and bonds, that would meet the needs, say of a charitable foundation, where the income would be the distribution. Rather than using sort of the new to my father, was the new method of investing strictly for total return and then estimating what one can safely withdraw from that. He was trying to create sort of a neoclassical method of protecting your principal and spending your income, but including, um, equity income as part that mix.

The goal was for a distribution that was in the 3 to 5% range with a decent amount of equity participation but a lot more stability than a standard equity program.

Apu Sikri: And have you evolved it, taking over that strategy or have you stayed, pretty much you feel, true to its original vision?

Jim Lovelace: I like to think I've stayed true to the original vision. It's been challenging particularly in the 2000s with very low interest rates. The original idea was to combine higher-yielding, slow or no-growing investments with moderate-yielding, faster-growing investments. And through most of the history of Capital Income Builder, fixed income, that is bonds have provided a very solid anchor of income, above that of equities.

What's happened in the last 18 years, as we've gone through several extended periods, where the return on fixed income is less than the return you would get from our equity investments. And that has been, has been challenging to maintain the basic idea of a significant income distribution where when bonds are not helping you out very much. But I think, we've managed to stay true to the original concept through this very difficult period.

As interest rates now are coming back up to historically “normal levels" the project actually is getting easier.  We're seeing the overall income flow growing again. So I actually think that rising interest rates will help the growth of income element of Capital Income Builder.



Jim Lovelace Portfolio Manager

James B. Lovelace is an equity portfolio manager at Capital Group. He also serves on the Portfolio Oversight Committee. He has 36 years of investment experience, all with Capital Group. Earlier in his career, as an equity investment analyst at Capital, Jim covered beverages & tobacco, restaurants & lodging, household products and personal care companies. Jim began his career at Capital as a participant in The Associates Program, a two-year series of work assignments in various areas of the organization. He holds a bachelor’s degree with honors in philosophy from Swarthmore College. He also holds the Chartered Financial Analyst® designation and is a member of the Los Angeles Society of Financial Analysts. Jim is based in Los Angeles.

Jim Lovelace is an investment professional on the Capital Income Builder strategy that was conceived in the U.S. more than 30 years ago. He is a portfolio manager of Capital Group Capital Income BuilderSM (Canada), available to Canadian investors on October 31, 2018.

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