Don’t Settle for Average
Our equity-focused funds have a long history of outpacing the market.
- It’s true — in aggregate, U.S. equity managers have not consistently outpaced Standard & Poor’s 500 Composite Index.
- But that’s akin to concluding that because the average person cannot dunk a basketball, no one can dunk a basketball.
- In fact, there are investment managers — including American Funds — that have consistently added value over a variety of market cycles.
- Over virtually the entire history of the mutual fund industry, American Funds equity-focused funds have added value.
- Indeed, overall results demonstrate that our funds have outpaced their indexes the majority of the time, and actually did better over longer periods.
- The record stands as a testament to The Capital System℠ and our process of management approach.
Our Equity-Focused American Funds Have a Long History of Outpacing the Market Our Investment Management Has Provided Investors With an Advantage
- Some critics contend that it’s challenging to find managers that can continue to provide above-benchmark returns based on past results.
- Persistency has been relatively abundant for American Funds equity funds. More often than not, our funds have led their indexes and continued to lead in the subsequent period.
- We believe persistency is a criterion that can help investors select funds with the potential to add value in the future.
Persistency Has Been Relatively Abundant for American Funds Funds Have Led Their Indexes and Often Continued to Lead in the Subsequent Period
- American Funds has always emphasized a long-term perspective and the importance of preserving capital during downturns. In contrast, index investing captures 100% of a market decline.
- When markets decline, or even just during periods of volatility, investors often react by making short-term decisions that can have long-term consequences for their portfolios.
- When building portfolios, it’s important to select managers whose investment process is oriented to downside resilience and low volatility, both of which can improve the investor experience.
- Expenses matter, and low fees are often cited as one of the benefits of index investing. But low fees aren’t solely the province of passive investing.
- The annual operating expenses across our equity funds are significantly below the industry average. Over time, that can make the difference between achieving financial goals, or falling short.
- At American Funds, our primary goal is to provide consistently superior long-term investment results. Low fees are a crucial element in achieving that goal and a demonstration of our alignment with investors.
1Data from Morningstar. Based on calendar-year returns of actively managed funds, excluding the American Funds, whose relevant benchmark is the S&P 500 Index. This universe excludes funds that fell in the Morningstar Moderate and World Allocation categories. Funds with incomplete data were removed from the analysis. For more information about filtering methodology, see Methodology.
4The capture ratio measures the extent to which a manager has limited negative absolute returns relative to the market’s decline. Market declines are defined as those months in which the market return was negative. This ratio is akin to a downside beta — specifying the percentage of the down market “captured” by the manager. If, for example, it is greater than 100%, then the manager has trailed in the down market. Conversely, a percentage less than 100% indicates a positive excess return for those market declines; the smaller, the better. Market indexes are unmanaged and, therefore, have no expenses. Investors cannot invest directly in an index. Data for downside capture are based on monthly returns for Class A shares. American Funds U.S. equity-focused funds represent only those funds (there are seven) whose comparable index is the S&P 500. For the list of funds that fall into this group, see Methodology.