Disclosure
Capital Group compensates portfolio managers based on returns, not asset volume
“If our investment results are the same and our tenure at Capital Group's the same, our bonus is the same. Meaning we don't incentivize a money grab to manage as many assets as you can.”
Assertion Supported
Over 80% of Capital Group equity strategies beat their benchmarks post-fees
“If you look at our equity strategies since inception, over 80% of them have beaten the market after fees.”
Disclosure
Capital Group ties portfolio manager bonuses primarily to eight-year performance
“And he's measured on his eight-year result first and foremost in his quantitative bonus, not his one-year result.”
Opinion
Large single-manager funds inevitably force the inclusion of low-conviction ideas
“When you're a sole practitioner in a strategy, and you're managing a lot of money, and you're diversified, you could be left with someone's less high conviction parts of the portfolio. The bottom 25% of their conviction names, why would you want those in a por…”
Opinion
Launching and closing speculative funds is experimenting with clients' life savings
“There are some that will launch a multitude of strategies, and if it works great, and if not, they'll close them. That's a lot of trial and error on somebody's life savings. We don't want to do that.”
Insight
Firms only avoid asset management partnerships to retain 100% of fees
“The only reason you wouldn't end up at partnership is if you wanted to retain a hundred percent of the economics.”
Assertion Supported
Capital Group analysts directly manage client assets, not just rate stocks
“Everyone sees what everyone's doing, and the analysts manage money. They're not credit raters. They're not stock raters. They actually manage real client assets, which is different.”
Disclosure
Capital Group gives new analysts up to six months before investing
“Instead of saying, be productive tomorrow morning when you join and manage money, we say, take three to six months. Look at this specific industry. Get to know all the managements of this industry. Look at the history of the coverage of it from everyone who ha…”
Disclosure
Capital Group's interview process can take six to twelve months
“It can take six to 12 months of the interview process to join Capital.”
Disclosure
Capital Group gives underperforming investors five-plus years to prove themselves
“If someone's not able to generate differentiated investment outcomes, they won't survive a capital group forever, but we give them five plus years. It's not as if we try to make that determination after one or two years, or having a great success in a short pe…”
Assertion Contradicted
Founder decreed Lovelace family cannot own Capital Group stock after grandchildren
“When JBL founded the company, he said in 1931, when my grandkids, who didn't exist at the time, when my grandkids pass away, no one in the Lovelace family should own any bit of Capital Group stock.”
Assertion Supported
Capital Group divides equity investing into three Chinese-walled units of 100
“There's about a hundred investment professionals in each of those three equity units. There is a Chinese wall. They can't see what the others are doing. It is formal disaggregation, but they also have an environment where they can sit around an actual table an…”
Insight
Optimal size for an investment dialogue group is 80 to 100 people
“What we have found in the last 20 years is somewhere between 80 and a hundred is the right number, and it's about the investment dialogue.”
Assertion Not checkable as stated
Capital Group manages $3.2 trillion across fewer strategies than major competitors
“It's the reason why we'll have 3.2 trillion in a certain number of strategies that in all likelihood is less than all of our major competitors because that hurdle is so high.”
Assertion Not checkable as stated
Institutional and wealth clients globally are shrinking their asset manager rosters
“What they have found, almost bar none in recent years, Is dealing with a multitude of asset management companies can be too noisy and hasn't necessarily generated better outcomes. So they are shrinking the number of partners they use. And when I say they, weal…”
Prediction Not checkable as stated
Wealth allocations to private markets will reach mid- to high-single digits
“Over time, as you see the world of wealth, utilize the private markets and go from low single digit utilization to mid single digit and high single digits. It's going to be a case-by-case conversation with a financial advisor and a family.”
Opinion
Excessive corporate governance serves as job justification and stifles employee ownership
“Most companies have way too much structure and governance and in some ways that becomes job justification and it doesn't allow people to have the ownership of their own plan.”
Assertion Supported
Over-allocated institutions have had to borrow against alts to meet liabilities
“Some institutions have long used alternatives, some too much, and they've had to borrow against some of those holdings recently to meet liabilities.”
Assertion Supported
Capital Group founder absorbed all losses until 1950s profitability
“Part of the secret of the Capital's success is he kept the entity a hundred percent owned by himself until it was profitable. He didn't want anyone else to share in any of the losses that would come in any calendar year. Only after in the fifties Capital Group…”
Assertion Not checkable as stated
Capital Group's overall attrition rate is half the asset management average
“The average attrition rate in asset management's, 13 or 14%. Ours is half of that. This is across the entire 9400 person entity of capital group.”
Assertion Not checkable as stated
Capital Group sees low single-digit attrition within its investment group
“In the investment group, it's even lower. It's low single digit attrition in the investment group.”
Assertion Not checkable as stated
Capital Group portfolio managers retire on average in their sixties
“So they come and say, the average retirement age of a portfolio manager at Capital Group is in their sixties. It's not in their forties or fifties.”
Disclosure
Capital Group shareholders must sell equity back over six years upon retirement
“If you become a shareholder of Capital Group, you hold it for your entire career, and upon retirement, over two, four, and six years, you then sell it back to the company, and we sell it on to the next shareholder.”
Assertion Not checkable as stated
Capital Group investment associates conducted 21,000 corporate meetings last year
“Last year, they did 21,000 company meetings. 21,000.”
