LOS ANGELES — As an early proponent of global investing, Capital Group Cos. concentrated its stock buying during the 1990s on companies and sectors with a global reach.
The approach paid off handsomely for a while, but, eventually, it took its toll. Investment professionals had to stretch too far; in the process, they overlooked key opportunities in ripe areas of investment, including Turkey, Brazil and South Africa.
When the stock market bubble burst in 2001, "all of a sudden, country-specific issues became important, and we missed some of those," acknowledged Andrew Barth, president of Capital Guardian Trust Co. Cap Guardian and its sister firm, Capital International Inc., are the two Capital Group units that manage institutional assets.
During a rare interview in his Los Angeles office earlier this month, Mr. Barth talked about how missteps caused performance to suffer, and what executives are doing to fix the problem — including taking a more regional focus.
Lagging three- and five-year performance cost Capital Guardian and Capital International 60 clients in emerging markets alone during the past year.
Clients also have terminated Capital Guardian because of poor performance in non-U.S. equity and U.S. small-capitalization value stocks.
The story of Capital's missteps and how it is trying to right itself is important because the firm — with about $985 billion under management, including $155 billion from Capital Guardian and about $45 billion from Capital International — is considered a first-tier money manager among institutional investors. Likewise, its American Funds mutual funds are darlings among 401(k) plans and retail investors.
Capital executives have refocused the way some emerging markets and non-U.S. equity investment professionals analyze companies, having them become regional specialists that concentrate on country-specific issues, rather than solely on global concerns.
"We always want to be a globally aware firm, but that doesn't mean (investment professionals) have to have their investment management or research responsibilities spread all over," Mr. Barth said.
Those who focus on Japan or Europe might be added to an EAFE mandate, he said.