Model portfolios in market uncertainty
American Funds® Model Portfolios Results for real-life investor goals
Samir Mathur
Chairman of the Portfolio Solutions Committee
Mario DiVito
Investment director
Stanley Moy
Multi-asset investment product manager
Key takeaways for the quarter ended March 31, 2022
- Markets attempted to absorb the shock of Russia’s late February invasion of Ukraine, the scale of a growing humanitarian crisis and potential geopolitical and economic implications around the globe.
- From an economic perspective, the crisis escalated worries about global inflation and supply chain disruptions following a two-year global pandemic. Policymakers weighed the challenges of rising inflation and possible economic slowdown; the U.S. Federal Reserve hiked interest rates for the first time since 2018, adopting a more hawkish tone for the rest of 2022.
- Growth models struggled as equity and bond markets fell; growth & income and income-oriented models held up better in the market decline, supported by dividend payers and better-than-benchmark results from bond investments. We recognize this as a difficult, uncertain time for investors and remain firmly grounded in our commitment to meeting client goals over the long term.
Markets retreated in the face of geopolitical crisis, global supply and inflation fears
The humanitarian crisis resulting from the Russian invasion of Ukraine on February 24 sent shockwaves around the world, triggering economic sanctions against Russia from major developed economies and heightened concerns about geopolitical risk. Markets continued to grapple with the implications of the Russia-Ukraine conflict as fighting raged on through the end of March and more than 4 million refugees fled Ukraine. The crisis further exacerbated fears about global inflation and supply chain issues; oil and gas prices soared. The February U.S. Consumer Price Index (CPI) rose further, jumping 7.9% year over year — the highest annual climb since 1982. The U.S. Federal Reserve raised interest rates in March, signaling more aggressive hikes for 2022.
Equity markets pulled back after sharp gains in 2021. The S&P 500 Index fell 4.60% despite a near 40% rise in energy stocks. MSCI All Country World Index (ACWI) ex USA declined 5.44%, with information technology and consumer discretionary stocks posting double-digit losses. Bond sectors slipped further, with a brief yield curve inversion in late March fueling jitters about recession. The Bloomberg U.S. Aggregate Index and Bloomberg U.S. Corporate Bond Index dropped 5.93% and 7.69%, respectively. The Bloomberg U.S. High Yield 2% Issuer Capped Index slipped 4.82%.
Growth portfolios
Our growth models have substantial allocations to equities, particularly growth stocks, given their capital appreciation objective. These portfolios returned -8.39% to -11.34% and trailed their core indexes during the first quarter as growth equities fell out of favor. While results of the underlying growth funds were challenged over the short term, growth allocations are necessary to pursue these models’ objectives over the longer term.
- American Funds® Global Growth Model Portfolio fell 11.34% for the quarter, lagging broader equity markets, specifically the MSCI All Country World Index (ACWI). Security selection in both U.S. and non-U.S. equities drove the negative relative results, with information technology and communication services a particular drag. Stock selection in non-U.S. financials and health care also hurt. More modest losses for Capital World Growth and Income Fund® helped temper double-digit declines experienced by SMALLCAP World Fund®, The New Economy Fund® and EuroPacific Growth Fund®. Geographic allocations shifted to 41% for non-U.S. equity and 52% for U.S. equity as of March 31.
- American Funds® Growth Model Portfolio declined 11.02% for the quarter and trailed the S&P 500 Index. Stock selection in the communication services and information technology sectors weighed on results. Holdings in certain entertainment streaming, social media platform and e-commerce companies were significant detractors to results amid disappointing subscriber and revenue data. More broadly, these firms suffered from a normalization of the strong demand for their services experienced earlier in the pandemic.
- American Funds® Moderate Growth Model Portfolio shed 8.39% for the quarter, falling behind its custom benchmark. Security selection within U.S. equities was the main detractor, particularly selection within the communication services and financials sectors. Security selection within non-U.S. equities was also negative, driven by financials and information technology. Underlying growth and income funds such as Fundamental Investors®, The Investment Company of America® and Capital World Growth and Income Fund® offset weakness from growth-oriented funds like The Growth Fund of America® and AMCAP Fund®.
Growth-and-income portfolios
Our growth-and-income portfolios, which generally seek a combination of long-term capital appreciation and income, returned -2.79% to -5.83% over the quarter, producing mixed results relative to their benchmarks. Allocations to underlying funds that focus their stock selection on dividend-paying equities are a key component of these strategies.
- American Funds® Growth and Income Model Portfolio slid 5.83% over the quarter and trailed its custom benchmark. Positive fixed income security selection combined with a more modest allocation than the index helped but was outweighed by negative security selection within equities. Certain holdings in financial services companies detracted from results, weighed down by global economic and political events. Investments in a home improvement company that saw less robust post-pandemic demand also hurt results. Washington Mutual Investors FundSM and Capital Income Builder® were the strongest returning underlying funds and helped nullify weakness from The Growth Fund of America and SMALLCAP World Fund.
- American Funds® Moderate Growth and Income Model Portfolio fell 4.95%, outpacing its custom benchmark. Positioning within fixed income was positive, especially allocations to inflation-linked bonds and security selection within corporate bonds, high yield and Treasuries. U.S. stock selection in industrials and energy sectors also helped, specifically in the aerospace industry, oil field services and upstream focused companies within energy. Non-U.S. stock selection hurt, particularly financials. The model’s asset allocation coming from the underlying flexible funds decreased equity to 66% while fixed income (ex- cash) ended the quarter at 29%.
- American Funds® Conservative Growth and Income Model Portfolio returned ‑2.79%, beating its custom benchmark. Positive contributions across equity and fixed income supported relative results, as did meaningful allocations to higher yielding securities. Stock selection within energy and industrials was particularly strong. Non-U.S. and U.S. stock selection in financials was negative. In fixed income, exposure to Treasuries and inflation-linked securities combined with selection in corporate and high yield bonds contributed to relative results. Underlying components American High-Income Trust® and American Funds Multi-Sector Income FundSM have tended to be large contributors to the portfolio’s higher overall yield compared to its benchmark, consistent with its primary objective of providing high current income.
Retirement income portfolios
Retirement income portfolios returned ‑3.18% to ‑3.64% for the quarter and outpaced their benchmarks. Through an approach that emphasizes long-term capital appreciation, capital preservation and current income to varying degrees, these models seek to support sustained withdrawals within their guidance ranges primarily through allocations to income-focused equities and generally higher quality fixed income.
- Significant exposure to higher-yielding equity sectors, including energy, consumer staples and utilities, helped results as did financials. Limited allocations to the often lower-yielding technology and consumer discretionary sectors were a tailwind to results.
- Equity positioning was beneficial as market uncertainty, increasing inflation, and rising interest rates buoyed more cyclically oriented sectors, defensive holdings, and interest rate sensitive securities. But more growth-oriented stocks retracted.
- Within fixed income, a large position in Treasury Inflation-Protected Securities (TIPs) was a bright spot. Emerging market debt holdings, particularly those denominated in U.S. dollars, was negative as the dollar weakened relative to several emerging markets currencies over the quarter.
- Longer-term results have supported the suggested withdrawal ranges for each respective portfolio.
Preservation and income portfolios
Income and preservation models returned ‑2.79% to ‑3.01% for the quarter, outpacing their custom benchmarks. Favorable fixed income positioning and strong security selection helped. These models are designed to preserve capital and provide current income primarily through a diversified portfolio of quality fixed income securities.
- American Funds® Conservative Income Model Portfolio outpaced its custom benchmark, with yield and volatility broadly in line with its benchmark. Exposure to inflation-linked bonds and security selection within securitized debt was beneficial, as was U.S. equity selection in the energy and industrials sectors. Selection in Non-U.S. energy also helped. The portfolio’s conservative positioning aligns with its objective of delivering current income while preserving capital.
- American Funds® Preservation Model Portfolio posted negative absolute returns for the quarter but beat its custom benchmark on a relative basis. A newer dedicated allocation to TIPs in the form of the American Funds Inflation Linked Bond Fund® helped in the current inflationary environment. Short-Term Bond Fund of America® was also a strong underlying fund contributor.
American Funds model portfolio pillars
Our model portfolios are constructed through a distinctive design framework, or pillars, that we believe help drive our strong long-term results and differentiate us from other model providers. Those pillars are:
- Objective-based process (intended to help clients achieve their goals)
- Strength of underlying funds
- Flexibility of underlying funds
- Recharacterization of equity (thoughtful approach to the type of equities used for different portfolio objectives)
- Four roles of fixed income suited to model objectives (equity diversification, income, inflation protection, capital preservation)
While each individual pillar is important to the portfolio construction process, we believe the thoughtful balance and combination of the pillars provide a powerful approach to delivering on portfolio objectives. As we look back over the previous quarter and year, we’d like to highlight two of our model portfolio construction pillars: Recharacterization of equity and strength of underlying funds.
Dividends shine, underlying funds remain strong over long term
From late 2021 through the first quarter 2022, equity markets experienced a sharp pivot from growth to value. Deeper-value stocks and certain cyclical securities rallied first, followed by more defensive positioning as volatility spiked. Many of these securities are among the higher yielding equity areas of the market; dividend payers led this quarter.
Model portfolio results reflect this recent style rotation. The strength of dividend payers has been a tailwind for our growth & income, income and retirement income portfolios. Shifting the types of equities used in our portfolios is a core tenant of our construction process and differentiates our model portfolios from the rest of the industry. Underlying components like Washington Mutual Investors Fund and American Mutual Fund® have outpaced the S&P 500 Index for the first quarter and one-year periods. Both funds have been strong drivers to certain model portfolios. Beyond the recent results, we consider the longer-term benefits of dividends for portfolio objectives. Our model portfolios that focus on income and/or conservation of capital are constructed with higher allocations to dividend-paying equities because they can provide income and can improve risk-adjusted returns by lowering overall portfolio volatility.
While growth model results have been challenged recently, we remain confident in the ability of our underlying portfolio managers to leverage significant global research capabilities and actively select securities with strong prospects for long-term capital appreciation. Investors in our growth portfolios typically have longer timeframes to allow for the appreciation of their investments and grow balances over time. Many of our underlying growth funds have historically delivered on these goals. For example, a model building block like The Growth Fund of America returned 15.27% annualized for the 10-year period ending March 31, 2022, while AMCAP Fund and SMALLCAP World Fund rose 13.38% and 11.36%, respectively, for the same period.
Q&A with Samir Mathur, Chairman of the Portfolio Solutions Committee
Rising rates, inflation and Fed policy actions have been top of mind for investors. How does the team navigate these challenges for fixed income investments in the model portfolios?
Rising rates, inflation and Fed policy are all critical topics for our underlying fixed income managers. Capital’s Portfolio Strategy Group (PSG) provides macro guidance for our fixed income strategies. Given recent guidance from the PSG, many of our fixed income funds have had shorter durations and larger exposure to TIPS than their benchmarks. This positioning has helped certain models better navigate the current environment. In our model portfolio construction process, we favor flexible funds such as American Funds Multi-Sector Income Fund and American Funds Strategic Bond FundSM, which can quickly move across fixed income asset classes or change characteristics, such as duration or Inflation-linked bond positioning. This dynamic approach allows us to respond appropriately for market situations like the current conditions. We rely on flexibility from the underlying funds to add value and mitigate risk, but also closely monitor exposures across our model portfolios.
Capital Solutions Group (CSG) is a dedicated team of multi-asset research associates that seeks to make appropriate moves in model portfolio allocations across asset classes while staying within predefined ranges. In addition to monitoring these exposures, the CSG conducts active research on fixed income and other multi-asset topics, such as seeking to ensure that the four roles of fixed income (income, capital preservation, inflation protection and equity diversification) are being implemented appropriately for each model objective.
How has the market rotation from growth to value stocks from the end of 2021 through early 2022 affected the model portfolios? What’s the CSG’s view on swift market rotations when it comes to model portfolio allocations?
The impact of such rotations would depend upon the specific model under consideration. Our growth models have a relatively larger exposure to growth stocks; these models trailed their core benchmarks in recent quarters, given the rapid move from growth to value. However, we are confident that our models with a capital appreciation objective are well constructed for their long-term objectives. For example, we introduced and gradually increased allocations to SMALLCAP World Fund (SCWF) within our growth-oriented models over the past few years. While results have not been favorable in the short term, SCWF allocations should provide significant diversification of the investment opportunity set while potentially improving the overall portfolio return profiles with marginally incremental risk over the long term.
Income-oriented portfolios such as our Conservative Growth and Income Model have larger exposure to higher dividend-paying stocks, which generally have a value tilt. Higher dividend payers did relatively well over the quarter. This is reflected in the better near-term results of our more conservative portfolios, which are measured on yield, lower volatility and risk-adjusted returns.
The invasion of Ukraine, rising inflation and other world events drove markets in the first quarter. How does the CSG view the potential for prolonged market volatility and possible impacts on the model portfolios? How is this measured?
Many of our underlying funds have decades of history, including other significant geopolitical events and volatile financial environments over the years. We can analyze actual results from those periods rather than guessing results. This helps us build portfolios that have been durable over various market cycles with previous events embedded into our modeling and back testing. On a forward-looking basis, we position our models to deal with various levels of market volatility, depending upon the success metrics of the portfolio.
We typically leverage the flexibility of our underlying funds to navigate through these difficult periods. During the recent market volatility, we have also been (1) frequently monitoring results and volatility of our underlying funds, (2) collaborating with the various risk monitoring and macro teams within Capital Group to analyze potential scenarios and (3) leveraging the deep experience of each of the individual members of the Portfolio Solutions Committee (PSC). The PSC — the investment committee for model portfolios — is comprised of portfolio managers across asset classes; some members of the PSC are also portfolio managers for underlying strategies. We believe this multi-faceted response has been useful in this challenging environment.
We understand the anxiety arising from increasing energy prices, political turmoil, and higher inflation. The CSG is constantly monitoring various portfolio exposures and metrics such as volatility, downside capture and drawdowns to assess whether the portfolios are satisfying their objectives. We can assure our investors that we are working tirelessly on their behalf to guide their investments through stressful times like this and help our clients meet their long-term goals.
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
All returns are for Class F-2 shares unless stated otherwise.
Results as of March 31, 2022. Figures shown are past results 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. View fund expense ratios and returns.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the mutual fund prospectuses and summary prospectuses, which can be obtained from a financial professional, and should be read carefully before investing.
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 should not be considered advice, an endorsement or a recommendation.
Investment results assume all distributions are reinvested and reflect applicable fees and expenses. Returns for one year or less are not annualized, but calculated as cumulative total returns.
When applicable, investment results reflect fee waivers and/or expense reimbursements, without which results would have been lower. Read details about how waivers and/or reimbursements affect the results for each fund. View results and yields without fee waiver and/or expense reimbursement.
There may have been periods when the results lagged the index(es). Certain market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index.
The model portfolios' risks are directly related to the risks of the individual funds as described below. 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. Small-company stocks entail additional risks, and they can fluctuate in price more than larger company stocks. 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. Fund shares of U.S. Government Securities Fund are not guaranteed by the U.S. government. While not directly correlated to changes in interest rates, the values of inflation linked bonds generally fluctuate in response to changes in real interest rates and may experience greater losses than other debt securities with similar durations. Investments in mortgage-related securities involve additional risks, such as prepayment risk, as more fully described in the prospectus. Income from municipal bonds may be subject to state or local income taxes and/or the federal alternative minimum tax. Certain other income, as well as capital gain distributions, may be taxable. The use of derivatives involves a variety of risks, which may be different from, or greater than, the risks associated with investing in traditional cash securities, such as stocks and bonds. American Funds Strategic Bond Fund may engage in frequent and active trading of its portfolio securities, which may involve correspondingly greater transaction costs, adversely affecting the fund's results. Bond ratings, which typically range from AAA/Aaa (highest) to D (lowest), are assigned by credit rating agencies such as Standard & Poor's, Moody's and/or Fitch, as an indication of an issuer's creditworthiness. If agency ratings differ, the security will be considered to have received the highest of those ratings, consistent with the portfolio's investment policies. Securities in the Unrated category have not been rated by a rating agency; however, the investment adviser performs its own credit analysis and assigns comparable ratings that are used for compliance with applicable investment policies.
For more information about the risks associated with each investment, go to its detailed information page or read the prospectus, if applicable.
Portfolios are managed, so holdings will change.
Data calculated by Capital Group. Results for model portfolios are based on actual allocations. Model results reflect changes, if any, in the underlying fund allocations over the model’s lifetime. Underlying funds may have been added or removed during a model's lifetime. Allocations are rebalanced monthly. Rebalancing approaches may differ depending on where the account is held. See capitalgroup.com/advisor/investments/model-portfolios.htm for historical underlying fund allocations. Results reflect, when applicable, fee waivers and/or expense reimbursements, without which the results would have been lower.
To view the prospectuses of the funds, please visit capitalgroup.com. The American Funds Model Portfolio expense ratios shown are gross expense ratios and represent the weighted averages for Class F-2 shares of the underlying funds as of each fund’s most recent prospectus available at the time of publication. Yield is the weighted average of the underlying funds’ annualized 30-day SEC yields at NAV. The 30-day SEC yield reflects the rate at which the fund is earning income on its current portfolio of securities. Class F-2 shares were first offered on August 1, 2008. Class F-2 share results prior to the date of first sale are hypothetical based on the results of the original share class of the fund without a sales charge, adjusted for typical estimated expenses. Results for certain funds with an inception date after August 1, 2008, also include hypothetical returns because those funds’ Class F-2 shares sold after the funds’ date of first offering. Please see capitalgroup.com for more information on specific expense adjustments and the actual dates of first sale.
Model portfolios are provided to financial intermediaries who may or may not recommend them to clients. These portfolios consist of an allocation of funds for investors to consider and are not intended to be investment recommendations. The portfolios are asset allocations designed for individuals with different time horizons investment objectives and risk profiles. Allocations may change and may not achieve investment objectives. If a cash allocation is not reflected in a model, the intermediary may choose to add one. Capital Group does not have investment discretion or authority over investment allocations in client accounts. Investors should talk to their financial professional for information on other investment alternatives that may be available. In making investment decisions, investors should consider their other assets, income, and investments. Visit capitalgroup.com for current allocations.
The underlying funds for each model portfolio as of March 31, 2022, are as follows (allocations may not equal 100% due to rounding): American Funds Global Growth Model Portfolio: Growth (80%): SMALLCAP World Fund 15%, The New Economy Fund 15%, EuroPacific Growth Fund 15%, The Growth Fund of America 15%, New Perspective Fund 20%; Growth and income (20%): Capital World Growth and Income Fund 20%. American Funds Growth Model Portfolio: Growth (80%): SMALLCAP World Fund 15%, The New Economy Fund 10%, The Growth Fund of America 25%, New Perspective Fund 10%, AMCAP Fund 20%; Growth and income (20%): Fundamental Investors 20%. American Funds Moderate Growth Model Portfolio: Growth (40%): SMALLCAP World Fund 10%, The Growth Fund of America 20%, AMCAP Fund 10%; Growth and income (40%): Fundamental Investors 10%, Capital World Growth and Income Fund 20%, The Investment Company of America 10%; Balanced (20%): American Funds Global Balanced Fund 10%; American Balanced Fund 10%. American Funds Growth and Income Model Portfolio: Growth (15%): SMALLCAP World Fund 8%, The Growth Fund of America 7%; Growth and income (50%): Capital World Growth and Income Fund 20%, The Investment Company of America 20%, Washington Mutual Investors Fund 10%; Equity Income (10%): Capital Income Builder 10%; Balanced (15%), American Balanced Fund 15%; Bond (10%): The Bond Fund of America 5%, American Funds Strategic Bond Fund 5%. American Funds Moderate Growth and Income Model Portfolio: Growth (10%): SMALLCAP World Fund 5%, New Perspective Fund 5%; Growth and income (25%): Capital World Growth and Income Fund 10%, Washington Mutual Investors Fund 15%; Equity Income: 10%): The Income Fund of America 10%; Balanced (40%): American Funds Global Balanced Fund 15%, American Balanced Fund 25%, Bond (15%): The Bond Fund of America 10%, American Funds Strategic Bond Fund 5%. American Funds Conservative Growth and Income Model Portfolio: Growth and income (20%): Washington Mutual Investors Fund 10%, American Mutual Fund 10%; Equity Income (38%): Capital Income Builder 19%, The Income Fund of America 19%; Bond (42%): American High-Income Trust 10%, American Funds Multi-Sector Income Fund 16%, The Bond Fund of America 16%. American Funds Retirement Income Model Portfolio — Enhanced: Growth (5%): AMCAP Fund 5%; Growth and income (15%): Capital World Growth and Income Fund 10%, American Mutual Fund 5%; Equity Income (38%): Capital Income Builder 14%, The Income Fund of America 24%; Balanced (25%) American Funds Global Balanced Fund 5%, American Balanced Fund 20%; Bond (17%): American High-Income Trust 5%, American Funds Multi-Sector Income Fund 7%, American Funds Inflation Linked Bond Fund 5%. American Funds Retirement Income Model Portfolio — Moderate: Growth and income (12%): Capital World Growth and Income Fund 7%, American Mutual Fund 5%; Equity Income (38%): Capital Income Builder 14%, The Income Fund of America 24%; Balanced (20%): American Funds Global Balanced Fund 5%, American Balanced Fund 15%, Bond (30%): American Funds Multi-Sector Income Fund 9%, American Funds Inflation Linked Bond Fund 5%, The Bond Fund of America 5%, American Funds Strategic Bond Fund 6%, U.S. Government Securities Fund 5%. American Funds Retirement Income Model Portfolio — Conservative: Growth and income (5%): American Mutual Fund 5%; Equity Income: (33%): Capital Income Builder 14%, The Income Fund of America 19%; Balanced (15%): American Funds Global Balanced Fund 5%, American Balanced Fund 10%; Bond (47%): American Funds Inflation Linked Bond Fund 6%, The Bond Fund of America 25%, American Funds Strategic Bond Fund 6% U.S. Government Securities Fund 10%. American Funds Conservative Income Model Portfolio: Growth and income (10%): American Mutual Fund 10%; Equity Income (10%): The Income Fund of America 10%; Balanced (9%): American Balanced Fund 9%; Bond (71%): The Bond Fund of America 20%, American Funds Strategic Bond Fund 11%, Intermediate Bond Fund of America 20%, Short-Term Bond Fund of America 20%. American Funds Preservation Model Portfolio: Bond (100%): American Funds Linked Inflation Bond Fund 5%, Intermediate Bond Fund of America 55%, Short-Term Bond Fund of America 40%. American Funds Tax-Aware Growth and Income Model Portfolio: Growth (15%): SMALLCAP World Fund 8%, The Growth Fund of America 7%; Growth and Income (65%): Fundamental Investors 15%, Capital World Growth and Income Fund 20%, The Investment Company of America 20%, Washington Mutual Investors Fund 10%; Bond (20%): The Tax-Exempt Bond Fund of America 20%. American Funds Tax-Aware Moderate Growth and Income Model Portfolio: Growth (10%): SMALLCAP World Fund 5%, New Perspective Fund 5%; Growth and Income (55%): Fundamental Investors 15%, Capital World Growth and Income Fund 20%, Washington Mutual Investors Fund 20%; Bond (35%): American High-Income Municipal Bond Fund 15%, The Tax-Exempt Bond Fund of America 20%. American Funds Tax-Aware Conservative Growth and Income Model Portfolio: Growth and Income (50%): Capital World Growth and Income Fund 20%, Washington Mutual Investors Fund 15%, American Mutual Fund 15%; Bond (50%): American HighIncome Municipal Bond Fund 25%, The Tax-Exempt Bond Fund of America 15%, Limited-Term Tax-Exempt Bond Fund of America 10%. American Funds Tax-Aware Moderate Income Model Portfolio: Growth and Income (40%): Capital World Growth and Income Fund 15%, Washington Mutual Investors Fund 15%, American Mutual Fund 10%; Bond (60%): American High-Income Municipal Bond Fund 15%, The Tax-Exempt Bond Fund of America 25%, Limited-Term Tax-Exempt Bond Fund of America 20%. American Funds Tax-Aware Conservative Income Model Portfolio: Growth and Income (20%): Capital World Growth and Income Fund 5%, American Mutual Fund 15%; Bond (80%): American High-Income Municipal Bond Fund 15%, The Tax-Exempt Bond Fund of America 25%, Limited-Term Tax-Exempt Bond Fund of America 25%, American Funds Short-Term Tax-Exempt Bond Fund 15%. American Funds Tax-Exempt Preservation Model Portfolio: Bond (100%): Limited-Term Tax-Exempt Bond Fund of America 70%, American Funds Short-Term Tax-Exempt Bond Fund 30%.
Model portfolio index/index blends
Index/Index blends for American Funds Model Portfolios are those that the Portfolio Solutions Committee believes most closely approximate the investment universe of a given model portfolio. The index/index blends do not specifically represent the benchmarks of the underlying funds in the American Funds model portfolio. The index/index blends for the model portfolios are a composite of the cumulative total returns for the indexes and respective weightings listed: Global Growth — MSCI ACWI. Growth — Index Blend: 70% S&P 500 and 30% MSCI ACWI ex USA Indexes through 6/29/20; and 100% S&P 500 Index thereafter. Moderate Growth — Index Blend: 65% S&P 500, 25% MSCI ACWI ex USA and 10% Bloomberg U.S. Aggregate Indexes through 6/29/20; and 60% S&P 500, 25% MSCI ACWI ex USA and 15% Bloomberg U.S. Aggregate Indexes thereafter. Growth and Income — Index Blend: 50% S&P 500, 30% MSCI ACWI ex USA and 20% Bloomberg U.S. Aggregate Indexes through 6/29/20; and 50% S&P 500, 25% MSCI ACWI ex USA and 25% Bloomberg U.S. Aggregate Indexes thereafter. Moderate Growth and Income — Index Blend: 40% S&P 500, 35% Bloomberg U.S. Aggregate and 25% MSCI ACWI ex USA Indexes through 6/29/20; and 45% S&P 500, 35% Bloomberg U.S. Aggregate and 20% MSCI ACWI ex USA Indexes thereafter. Conservative Growth and Income — Index Blend: 40% S&P 500, 30% Bloomberg U.S. Aggregate, 15% Credit Suisse High Yield and 15% MSCI ACWI ex USA Indexes through 12/31/92. From 1/1/93 through 6/29/20, the blend was 40% S&P 500, 30% Bloomberg U.S. Aggregate, 15% MSCI ACWI ex USA and 15% Bloomberg U.S. Corporate High Yield 2% Issuer Capped Indexes; and 35% S&P 500, 35% Bloomberg U.S. Aggregate, 15% MSCI ACWI ex USA and 15% Bloomberg U.S. Corporate High Yield 2% Issuer Capped Indexes thereafter. Retirement Income portfolios — S&P Target Date Retirement Income Index. Conservative Income — Index Blend: 50% Bloomberg U.S. Aggregate Index, 30% Bloomberg U.S. Government/Credit (1-3 years, ex BBB) Index and 20% S&P 500 Indexes. Preservation — Bloomberg 1-5 Year U.S. Government/Credit A+ Index. Tax-Aware Growth and Income — Index Blend: 25% Bloomberg Municipal Bond, 50% S&P 500 and 25% MSCI ACWI ex USA Indexes. Tax-Aware Moderate Growth and Income — Index Blend: 40% Bloomberg Municipal Bond, 40% S&P 500, 20% MSCI ACWI ex USA Indexes through 6/29/20; and 45% S&P 500, 35% Bloomberg Municipal Bond and 20% MSCI ACWI ex USA Indexes thereafter. Tax-Aware Conservative Growth and Income — Index Blend: 50% Bloomberg Municipal Bond, 35% S&P 500, 15% MSCI ACWI ex USA Indexes through 6/29/20; and 35% Bloomberg Municipal Bond, 35% S&P 500, 15% Bloomberg High Yield Municipal and 15% MSCI ACWI ex USA Indexes thereafter. Tax-Aware Moderate Income — Index Blend: 70% Bloomberg Municipal Bond, 20% S&P 500, 10% MSCI ACWI ex USA Indexes through 6/29/20; and 65% Bloomberg Municipal Bond, 25% S&P 500 and 10% MSCI ACWI ex USA Indexes thereafter. Tax-Aware Conservative Income — 40% Bloomberg Municipal Bond, 40% Bloomberg Municipal 1–7 Year Blend, 15% S&P 500 and 5% MSCI ACWI ex USA Indexes through 6/29/20; and 40% Bloomberg Municipal Bond, 40% Bloomberg Municipal 1–7 Year Blend and 20% S&P 500 Indexes thereafter. Tax-Exempt Preservation — Bloomberg Municipal Bond 1–7 Year Blend. The index blends are rebalanced monthly. MSCI index results reflect dividends gross of withholding taxes through 12/31/00 and dividends net of withholding taxes thereafter. The indexes are unmanaged, and their results include reinvested dividends and/or distributions but do not reflect the effect of sales charges, commissions, account fees, expenses or U.S. federal income taxes. Investors cannot invest directly in an index. There have been periods when the model portfolio has lagged the index/index blend.
S&P 500 Index is a market capitalization–weighted index based on the results of approximately 500 widely held common stocks.
The S&P Target Date Retirement Income Index, a component of the S&P Target Date Index Series, has an asset allocation and glide path that represent a market consensus across the universe of target date fund managers.
The S&P 500 Index and S&P Target Date Retirement Income Index are products of S&P Dow Jones Indices LLC and/or its affiliates and has been licensed for use by Capital Group. Copyright © 2022 S&P Dow Jones Indices LLC, a division of S&P Global, and/or its affiliates. All rights reserved. Redistribution or reproduction in whole or in part is prohibited without written permission of S&P Dow Jones Indices LLC.
MSCI All Country World Index is a free float-adjusted market capitalization weighted index that is designed to measure equity market results in the global developed and emerging markets, consisting of more than 40 developed and emerging market country indexes. Results reflect dividends gross of withholding taxes through December 31, 2000, and dividends net of withholding taxes thereafter.
MSCI All Country World ex USA Index is a free float–adjusted market capitalization weighted index that is designed to measure equity market results in the global developed and emerging markets, excluding the United States. The index consists of more than 40 developed and emerging market country indexes. Results reflect dividends gross of withholding taxes through December 31, 2000, and dividends net of withholding taxes thereafter.
MSCI has not approved, reviewed or produced this report, makes no express or implied warranties or representations and is not liable whatsoever for any data in the report. You may not redistribute the MSCI data or use it as a basis for other indices or investment products.
Bloomberg U.S. Aggregate Index represents the U.S. investment–grade fixed–rate bond market.
Bloomberg U.S. Corporate High Yield 2% Issuer Capped Index covers the universe of fixed–rate, non–investment–grade debt. The index limits the maximum exposure of any one issuer to 2%.
Bloomberg High Yield Municipal Bond Index is a market–value–weighted index composed of municipal bonds rated below BBB/Baa.
Bloomberg Municipal Bond Index is a market–value–weighted index designed to represent the long–term investment–grade tax–exempt bond market.
Bloomberg Municipal Bond 1–7 Year Blend Index is a market–value–weighted index that includes investment–grade tax–exempt bonds with maturities of one to seven years.
Bloomberg 1–5 Year U.S. Government/Credit A+ Index is a market–value weighted index that tracks the total return results of fixed–rate, publicly placed, dollar–denominated obligations issued by the U.S. Treasury, U.S. government agencies, quasi–federal corporations, corporate or foreign debt guaranteed by the U.S. government, and U.S. corporate and foreign debentures and secured notes that meet specified maturity, liquidity and quality requirements, with maturities of one to five years, including A–rated securities and above.
Bloomberg Index Services Limited. BLOOMBERG® is a trademark and service mark of Bloomberg Finance L.P. and its affiliates (collectively “Bloomberg”). Bloomberg or Bloomberg’s licensors own all proprietary rights in the Bloomberg Indices. Neither Bloomberg nor Bloomberg’s licensors approves or endorses this material, or guarantees the accuracy or completeness of any information herein, or makes any warranty, express or implied, as to the results to be obtained therefrom and, to the maximum extent allowed by law, neither shall have any liability or responsibility for injury or damages arising in connection therewith.
This content, developed by Capital Group, home of American Funds, should not be used as a primary basis for investment decisions and is not intended to serve as impartial investment or fiduciary advice.
All Capital Group trademarks are registered trademarks owned by The Capital Group Companies, Inc. or an affiliated company. All other company and product names mentioned are the trademarks or registered trademarks of their respective companies.
The Capital Group companies manage equities through three investment divisions that 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.
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 should not be considered advice, an endorsement or a recommendation.
Use of this website is intended for U.S. residents only.
American Funds Distributors, Inc., member FINRA.