On a recent due diligence trip to Los Angeles, Mike McCann and I had the opportunity to engage with the Capital Group, the investment manager for American Funds. I walked away from that visit with three strong impressions that I believe benefit our clients:
1. Unique corporate culture
2. Process + Consistency = Results
3. Results vs. Performance
The Capital Group was founded in 1931 and has distinguished itself as one of the few actively-managed mutual-fund companies that has consistently provided above-average results. Their unique corporate culture has enabled them to do things differently than many of their competitors. For example, they’ve been able to recruit and retain top talent. This is evidenced by the long average tenure of their investment professionals, which is more than twice that of the industry average (11.6 years vs. 5 years). An experienced investment team ensures there are professionals who have managed through many different market cycles, especially the difficult ones.
Another important aspect of the culture – borne out of this longevity – is the consistency of their process. The Capital Group emphasizes rigorous fundamental research, long-term decision-making, low fees and independent thinking, all of which have helped produce favorable long-term results for their clients. Such results, in turn, provide reassurance for current investors as well as future investors of their products.
The final distinction I realized during our time with Capital Group was the difference between performance and results. They made it clear that within their organization they do not focus on performance. Performance is something that may sound good in an advertisement. Yet, it is the results that are important, because the results are the money in the bank, the resources that clients can live on.
Knowing the investment professionals at American Funds view results in this way, and knowing they are not “chasing performance” to publish in their next brochure, gives me peace of mind.
This part of the Capital Group process enables me to feel comfortable and confident that we at Perspective Financial are investing our clients’ hard-earned money with a company that is also putting their clients’ interests before their own.