No one's ever been able to accuse American Funds of chasing the hot money with new mutual fund launches. Until now, that is.
With the Great Bond-Buying Market going strong for the fourth straight year, American Funds has announced plans to launch three new bond funds in 2013. The proposed funds will cover global investment grade credit, global high yield, and Treasury inflation-protected securities.
Normally, a money manager planning new bond funds while investors are busy pouring unprecedented amounts of new cash into the asset class wouldn't raise many eyebrows.
American Funds, however, has long prided itself on its selectivity. From 2000 to 2010, for example, the mutual fund arm of The Capital Group Cos. Inc. launched only three new funds and those more often than not have been in out-of-favor categories, such as emerging markets.
“They've never been one to launch what's trendy,” said Kevin McDevitt, a mutual fund analyst at Morningstar Inc. “It's very out of character for them.”
The macro backdrop isn't only about bond funds, which have more than doubled their assets to more than $2 trillion since 2008. Actively managed equity funds, the bread and butter at American Funds, have been bond funds' polar opposites, at least in terms of investor withdrawals.
Through August, assets in American Funds' equity funds were down to $518 billion, from $619 billion in 2009, even as various stock market measures more than doubled over that time period. Net outflows at the firm totaled more than $300 billion over the same time span.
“You have to wonder, with such consistent outflows over three-plus years, if it's not, in some way, a response,” Mr. McDevitt said.
American Funds spokesman Chuck Freadhoff said it's easy to draw the connection between the outflows and the planned bond funds, but that's not the reason the funds are being prepped.
“It's not a matter of market timing. We expect these funds to be around for a very long time,” Mr. Freadhoff said. “We think that there is a place for bonds in everyone's portfolio. Whether in a bull market for equities or not, a well-diversified portfolio includes bonds. Our bond guys have long thought we needed a more complete lineup.”
American Funds will have 10 bond funds after the new funds are launched, five shy of their equity lineup.
The existing bond funds, which have a total of $84 billion in assets, had $603 million inflows through the end of August, compared with $38.8 billion of outflows in the stock funds.
Jason Kephart writes for InvestmentNews, a sister publication of Pensions & Investments.