Managers eat their own cooking at Capital Group U.S. Equity Fund
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By Dave Paterson  | Wednesday, August 09, 2017


 

While the Capital Group U.S. Equity Fund is publishing a track record of just over three years in Canada, it is now modelled after the firm’s oldest portfolio, the Investment Company of America, a fund that was launched in 1933, and boasts a strong track record of performance.

Funds in the Capital Group use the “Capital System,” by which portfolios are divided into portions that are managed independently by investment professionals with diverse backgrounds, ages, and investment approaches. Capital Group U.S. Equity Fund managers Christopher D. Buchbinder, Barry S. Crosthwaite, and Mark Hickey thus oversee a portfolio that tends to be rather style-agnostic.

The sector mix is different than its benchmark, the S&P 500 Composite Index. At the end of June, top sectors included information technology at 17.8%, financials at 15.2%, and healthcare at 14.9%.

The fund holds over 70 names, with the top 10 making up just over a third of the fund’s holdings. Valuation, while not cheap, looks significantly more attractive than the S&P 500 or its peers. As of June 30, top holdings included drug manufacturer AbbVie Inc. (NYSE: ABBV), telco Verizon Communications Inc. (NYSE: VZ), biotech Amgen Inc. (NASDAQ: AMGN), conglomerate Berkshire Hathaway Inc. (NYSE: BRK.A), and insurance company American International Group Inc. (NYSE: AIG).

The managers take a longer-term outlook to investing that’s reflected by their annual portfolio turnover, which has averaged approximately 35% for the past three years.

Capital Group is well known for its high level of manager co-investment in the funds. At the end of June, 97% of the firm’s managers had more than $1 million invested in their mandates, aligning their interests with their investors.

Costs are very reasonable, with an MER of 2.04%, which is well below the category average.

Given the emphasis on risk management, I wouldn’t expect this to shoot the lights out, but I would expect it to deliver index-like or better returns with volatility levels that are slightly better than the broader market. All these factors align to make this a very compelling reason to consider this fund for your U.S. equity exposure.

Capital Group U.S. Equity Fund
Fund company:
Capital International Asset Management (Canada)
Fund type:
U.S. Equity
Rating: C (June)
Style: Large Cap Blend
Risk level: Medium
Load status: Optional
RRSP/RRIF suitability: Good
Managers: Christopher Buchbinder; Barry Crosthwaite; Mark Hickey, all since January 2014
MER: 2.04%
Fund code: CIF847 (front-end load)
Minimum investment: $500

Dave Paterson, CFA, is the Director of Research, Investment Funds for D.A. Paterson & Associates Inc., a consulting firm specializing in providing research and due diligence on a variety of investment products. He is also the publisher of Dave Paterson’s Top Funds Report, offering regular commentary and in-depth analysis of Canada’s top investment funds. He uses a unique analytical approach to identify funds with strong, risk-adjusted returns, and regularly publishes his insights and analyses in Fund Library.

Notes and Disclaimer

© 2017 by Fund Library. All rights reserved. Reproduction in whole or in part by any means without prior written permission is prohibited.

Commissions, trailing commissions, management fees and expenses all may be associated with fund investments. Please read the simplified prospectus before investing. Mutual funds are not guaranteed and are not covered by the Canada Deposit Insurance Corporation or by any other government deposit insurer. There can be no assurances that the fund will be able to maintain its net asset value per security at a constant amount or that the full amount of your investment in the fund will be returned to you. Fund values change frequently and past performance may not be repeated. No guarantee of performance is made or implied. This article is for information purposes only and is not intended as personalized investment advice.

 

   
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