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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.
”The Average Investment Manager Can’t Beat the Index” True, But Not the Whole Story
Data from Morningstar.1
A Track Record of Superior Returns
- 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
Data from published sources were calculated internally.2
Are Returns Reliable? Repeatable?
- 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
Data from published sources were calculated internally.3
Improving the Investor Experience
- 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.
A Long History of Resilience During Downturns Our Funds Have Often Shown Strength in Market Declines
The capture ratio measures the extent to which a manager has limited negative absolute returns relative to the market’s decline.4
Low Fees Have Fueled The Capital Advantage℠
- 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.
Low Fees Make a Difference in the Long Run
Source for industry averages: Lipper, based on comparable categories for front-end load funds, excluding funds of funds, as of each fund’s most recent fiscal year-end available as of December 31, 2016.5
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.
2Data from published sources were calculated internally. Numbers of periods are based on rolling monthly data for all funds — reducing entry- and exit-point bias and better reflecting the range of entry points experienced by investors. American Funds represents 18 equity-focused funds, in aggregate: AMCAP Fund, American Balanced Fund, American Funds Global Balanced Fund, American Mutual Fund, Capital Income Builder, Capital World Growth and Income Fund, EuroPacific Growth Fund, Fundamental Investors, The Growth Fund of America, The Income Fund of America, International Growth and Income Fund, The Investment Company of America, The New Economy Fund, New Perspective Fund, New World Fund, SMALLCAP World Fund, American Funds Developing World Growth and Income Fund and Washington Mutual Investors Fund. For each fund’s comparable index/index blend, see Methodology. Past results are not predictive of results in future periods.
3Data from published sources were calculated internally. Numbers of periods are based on rolling monthly data for all funds — reducing entry- and exit-point bias and better reflecting the range of entry points experienced by investors. American Funds represents 18 equity-focused funds, in aggregate. For the list of funds and their comparable indexes/index blends, see Methodology. Past results are not predictive of results in future periods.
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.
5Source for industry averages: Lipper, based on comparable categories for front-end load funds, excluding funds of funds, as of each fund’s most recent fiscal year-end available as of December 31, 2016. Due to their significant investments outside the U.S., Capital World Growth and Income Fund, EuroPacific Growth Fund, International Growth and Income Fund, New Perspective Fund, New World Fund and SMALLCAP World Fund are included in the International/Global equity category. The American Funds expense ratios are for Class A shares as of each fund’s most recent prospectus available on January 1, 2017. 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 Class A share results without a sales charge, with Class F-2 results adjusted for typical estimated expenses. Results for certain funds with an inception date after August 1, 2008 for Class F-2 also include hypothetical returns because those funds’ Class F2 shares sold after the funds' date of first offering. Please see americanfunds.com for more information on specific expense adjustments and the actual dates of first sale. Expense ratios do not reflect sales charges. Not intended to portray actual expenses and investment results. Your experience will differ.
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.
Securities offered through American Funds Distributors, Inc.
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 should not be considered advice, an endorsement or a recommendation.