"We snuck up on people's radars over the last couple years," Ryan Murphy, head of fixed-income business development at the Los Angeles-based firm, said in an interview. Capital Group made an enormous investment in people, technology and infrastructure to increase its presence in bond funds over the past decade, Murphy said, capped by a "big push over the last 18 months into the ETF market."
There's about $6 trillion more sitting on the industry's sidelines in money-market funds, but Capital Group could have a challenging time attracting enough of that cash to keep up its growth pace. The firm will face intense head-to-head competition against rivals with higher profiles in the bond business such as PIMCO, BlackRock, Fidelity Investments and J.P. Morgan Chase & Co., which can exploit their scale and relationships with their vast base of retail and institutional clients. And those robotic index funds, whose low costs make their returns hard to beat, aren't going away, either.
Bond Fund of America assets have roughly almost tripled to about $80 billion since the start of 2015. The gain includes $7.2 billion since the beginning of 2022, when the Federal Reserve began hiking interest rates that wreaked havoc on bond values and sent clients fleeing. It's a stark contrast with outflows over the same two-year span at big rivals, such as PIMCO's Income Fund and Total Return Fund Fund, TCW's Metropolitan West Total Return Bond Fund and PGIM's Total Return Bond.
Representatives for the other firms declined comment or didn't respond to messages.
In part, Capital Group's progress is the result of a setback on bonds more than a decade ago at the 93-year-old company, founded by Jonathan Bell Lovelace after the 1929 crash as a stock research firm. For decades, bonds stayed in the shadow of Capital Group's marquee stock funds, which managed about $1.8 trillion at midyear, until a more recent financial crisis shook the business.
Between October 2007 and March 2009, Bond Fund of America dropped more than 13% while the broad aggregate bond index rose 7%. The humbling experience set off a series of management and risk-analysis changes, according to Alec Lucas, director of fixed income strategies at Morningstar.
Capital Group doubled its fixed-income operation to around 200 employees globally and snapped up key outsiders from rivals. Newcomers included Mike Gitlin, T. Rowe Price Group's head of fixed income, who joined in 2015 and is now Capital Group's chief executive.
It recruited Pramod Atluri in 2016 from Fidelity Investments, who now leads investments for Bond Fund of America; Shannon Ward, hired in 2017 from Oaktree Capital Management as a high yield specialist; and Thomas Chow, who came over in 2015 from Delaware Investments, where he was chief investment officer of corporate credit. Chitrang Purani arrived in April 2022 from PIMCO as a portfolio manager. Atluri's team at BFA today also includes David Betanzos, David Hoag and Fergus MacDonald.
Changes included greater accountability for principal investment officers of the funds and improving analysis of macroeconomic analysis, Lucas said. The firm opened new fixed-income desks in New York and Singapore since 2015, complementing existing operations in London and Los Angeles.
