That $10 billion drop is significant because market appreciation alone should have buoyed the two firms' assets under management.
Capital Guardian's and Capital International's 2005 returns didn't improve enough to make their three-year records look attractive.
CapGuardian's non-U.S. equity strategy underperformed its bogey by an annualized 47 basis points for the three years ended Dec. 31, while CapInternational's emerging markets growth strategy trailed its benchmark by 2.1 percentage points for the same period, according to eVestment Alliance.
With those three-year returns, Capital Guardian and Capital International could still be facing "an uphill battle," said Shelly Heier, a consultant with Wurts & Associates, Seattle.
(For five years, non-U.S. equity outperformed its benchmark by 98 basis points, but emerging markets growth trailed by 2.3 percentage points.)
Still, last year's performance was good enough to keep some pension fund clients who put the firms on their watch lists from pulling the trigger:
cThe $80 billion New York State Teachers' Retirement System, Albany, removed Capital Guardian from its watch list, where it had been since July 29 because of weak performance. CapGuardian manages a $1.2 billion international equity portfolio for the fund, said pension fund spokesman John Cardillo.
cThe $1.7 billion San Joaquin County Employees' Retirement System, Stockton, Calif., which has a $202 million international equity mandate with Capital Guardian, might take the firm off a watch list if the improvement seen in 2005 continues, said Annette H. St. Urbain, an assistant retirement administrator.
cOfficials at the $61.2 billion Washington State Investment Board, Olympia, "see improvement" in the performance of the $128.1 million emerging markets growth portfolio Capital Guardian manages for Washington, said spokeswoman Liz Mendizabal. The firm remains on the watch list, where it has been since July 2004, she said.
cAlthough the $4.4 billion Alameda Country Employees Retirement Association, Oakland, Calif., is keeping Capital Guardian on watch for a $686 million international equity portfolio it manages, fund officials noted in December that the portfolio was 130 basis points ahead of its benchmark for the first nine months of 2005.
On the other hand, a few public fund clients — including the $2.5 billion Kern County Employees' Retirement Association, Bakersfield, Calif. — are still pursuing requests for proposals that could result in terminating the Capital Group firms.
Others have continued to take back money, but more to hedge their overseas bets by tapping quantitative strategies than to reject the firms outright.
For example, on Feb. 9, the $32 billion Los Angeles County Employees' Retirement Association, Pasadena, Calif., announced it would transfer $500 million from a $700 million international equity mandate with Capital Guardian to Boston-based quant shop Acadian Asset Management, in pursuit of "diversification."
Similarly, on Jan. 24, the $800 million Kansas City (Mo.) Employees' Retirement System transferred one-third of its $30 million emerging markets equity mandate with Capital Guardian to Chicago-based LSV Asset Management.