Unlocking Real Value Blog

AK In The News: American Funds Should Launch More Products

I was asked to comment on a poll of Ignites (a Financial Times Service) readers on whether or nor they supported American Funds’ decision to launch a number of new funds, primarily focusing on non-core areas. More than 77% of respondents agree that the firm should launch new products,as this shows that the firm is evolving and meeting advisor demand for new products.

Only about 14% of respondents disagree with the move, arguing that it will cause the firm to loose focus and may hurt the management of their current funds. Historically, the firm has been known for having a relatively small, conservative lineup of mostly domestic equity funds. The firm did, however, launch eight new funds last May, including an emerging markets fund.

I agree with the move, in part given the size and strength of the research staff at the company; I don’t think they will loose focus on what got them where they are today. My only concern is if they stray too far into the alternatives space. I have been worried for awhile about the proliferation of alternative funds at the retail level, mostly because I don’t feel that a lot of investors understand what they are investing in; this could lead to large outflows and hurt performance.

To quote from the article:  “After suffering $200 billion in net outflows over the past three years, the new rollouts make sense, says Andrew Klausner, founder and partner of AK Advisory Partners. Furthermore, he is not surprised that advisors would support the shift in strategy as long as the products deliver on performance.

“American Funds has had considerable outflows and quite a bit of negative press over the past couple of years, but advisors have a short memory, and if they want something they’re going to go to whoever can provide it,” Klausner says.

“I think the market is forcing them to look at other things,” Klausner says. Domestic equity “active management has taken a hit in the press and a lot of organizations have looked at ways to expand what they do,” he adds.”

Do you agree?

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