Capital Guardian Trust Co. had $43.9 billion under management at the end of October — less than a third of what it had at its peak four years ago — but company officials have faith that a recent reorganization will reverse the veteran money manager's course.
In a rare interview at the company's Los Angeles headquarters, Shaw B. Wagener, chairman of Capital Group International Inc., Capital Guardian's parent, gave an inside view of how Capital Guardian officials plan to regain clients and assets under management.
Mr. Wagener said the reorganization, which was finished this summer after several years of work, is aimed at across-the-board improvements, from investment returns to sales and servicing.
Key to that effort is to improving the performance of some investment strategies. “We did have investment results that were disappointing both to ourselves and clients in some areas, so we've had redemptions related to results,” said Mr. Wagener.
The U.S. equities strategy, for example, returned 6.23% for the year ended Oct. 30 compared with the 8.09% return for the Standard & Poor's 500. For the five years ended Oct. 30, the strategy had an annualized -2.04% compared with the benchmark's 0.25%. The strategy had more than $3 billion in assets at the beginning of 2011, but lost almost half of that when the New York State Common Retirement Fund terminated its $1.2 billion account with the money manager in March.
Other key strategies, however, have performed better than their benchmarks. The company's largest strategy, the $23 billion non-U.S. equity strategy, returned -3.26% for the year ended Oct. 30 compared with its benchmark, the MSCI Europe Australasia Far East index, which returned -4.08%. Over the five year period, the strategy had annualized returns of -1.65% against the benchmark's -2.41%.
Capital Guardian had 354 clients at the end of September, down from 464 at the end of 2007.
Company executives hope improved performance will help prevent client terminations, like its termination by the $9.6 billion Oklahoma Teachers Retirement System, Oklahoma City, in September. Capital Guardian had managed a $346 million international growth equities separate account for the plan.
“We don't like to make snap judgments, but we'd been watching their short-term performance and it's a continuation of a larger trend of underperformance,” said James Wilbanks, executive director of Oklahoma Teachers.
As of Sept. 30, the strategy's one-year performance was -11.97% compared with -10.81% for its benchmark, the MSCI All Country World index, ex-U.S., according to Capital Guardian figures. For the five-year period ended Sept. 30, the mandate returned an annualized -3.18% vs. the benchmark's -2.31%.