Capital Expands Investment Options After Drop in Assets

Capital Group Cos., owner of American Funds, expanded its investment options and reorganized its equity teams in response to feedback from financial advisers.

Capital Group plans to offer separately managed accounts, or SMAs, to retail customers for the first time, Chuck Freadhoff, a spokesman for the Los Angeles-based firm, said in an interview today. The company has begun offering more collective investment trusts, or CITs, increasing the number of institutional products that mirror the firm’s mutual funds. It also removed the divisions between managers overseeing stock investments for retail and institutional clients.

“When you listen to advisers, they would prefer to work with fewer asset managers, and they would like to have the same managers available in the mutual funds, the variable annuities and the separately managed accounts,” Kevin Clifford, head of fund distribution, said in an e-mailed statement.

Capital Group, the third-largest U.S. mutual-fund company, has started to slow a more than two-year exodus of customer assets. Investors deposited money with American Funds in January and February, the first positive months since May 2010. The company lost a net $61.6 billion to mutual fund withdrawals in 2012 and $5.6 billion from its largest institutional unit, Capital Guardian Trust, according to research firms Morningstar Inc. (MORN) and eVestment.

Assets at the firm fell to $1.14 trillion as of Dec. 31 from $1.5 trillion at the end of 2007.

‘Limited Number’

Separately managed accounts typically provide wealthy clients or financial advisers more customized investments than mutual funds. Capital Group’s new accounts will be available through a “limited number” of broker-dealers by the end of June, Freadhoff said. The brokers will establish the minimum investment requirements.

CITs are unregistered, pooled investment products, typically with lower fees than mutual funds because of cheaper marketing and compliance-related costs.

Capital Group has opened CITs modeled after the $73 billion Capital World Growth and Income Fund and the $6.1 billion International Growth and Income Fund. The firm plans six more of the trusts, which are targeted primarily at 401(k) retirement plans, Freadhoff said.

The reorganization of investment-management teams means the company will drop the names of several units, including Capital Guardian, Capital Research and Management, and Capital International, Freadhoff said. The company will now rely on two brand names: Capital Group and American Funds.

The changes were reported earlier today by Pensions & Investments.

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editor responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net

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