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Friday, November 18, 2011

American Funds' Lovelace Dies

News summary by MFWire's editors

The mutual fund industry lost one of its legendary figures this week. Jon B. Lovelace, chairman emeritus of Capital Research and Management Company [see profile] and former chairman of The Capital Group of Companies, died Wednesday at the age of 84 (see press release from Capital Group below).

Jon B. Lovelace

Lovelace died of natural causes at his Santa Barbara home, according to the Los Angeles Times.

Lovelace, son of Capital Group founder Jonathan Bell Lovelace, helped launch American Funds' multiple portfolio counselor system in the 1950s. The MFWire.com named him No. 43 in its list of the 100 Most Influential People in the Mutual Fund Industry in 2010.

He was one of the 60 mutual fund industry visionaries honored at Strategic Insight's 25th anniversary dinner in New York last week. American Funds' Paul Haaga told attendees at the dinner that Lovelace was in ill health and unable to attend the event.

Lovelace was born in 1927 in Detroit. He joined the Army during World War II and after the war, he attended Princeton University. He went on to join Pacific Finance Company in the personnel department.

In 1951, he joined The Capital Group as a statistician amid a reorganization at the firm. He became a portfolio counselor in 1953.

In 1964, Lovelace became chairman and president of Capital Research & Management Company. Under his watch, the firm became a pioneer in international and global investing. Despite running one of the largest mutual fund firms, he kept a low profile, preferring to stay away from the limelight.

Capital had four funds in 1964. Now, it offers 33 mutual funds and also manages target-date funds, institutional mandates and a college savings program.

Lovelace retired from the firm in 2005. His sons Jim and Rob are portfolio counselors at Capital.

"The mutual fund industry has lost a great leader with the death of Jon B. Lovelace," Investment Company Institute president and CEO Paul Schott Stevens, in an e-mailed statement. "His creativity and innovation, and his emphasis on investing for the long term, helped build a firm of quality and integrity. I am confident Jon Lovelace’s vision will continue to be a sustaining force for the company."

"He was one of the really great men of the investment profession over the last 100 years," said Charles Ellis, author of the book Capital: The Story of Long-Term Investment Excellence and founder of Greenwich Associates.

Lovelace was also a philanthropist, Dixieland jazz afficionado, environmentalist and hiker.

'Pray for the Dodgers'

Lovelace is survived by his wife Lillian, whom he married in 1950, his daughter Carey Lovelace and three sons, Jeffrey, Jim and Rob, and six grandchildren. In the press release, the family said that instead of flowers, they request that "donations be made to the Sansum Clinic, attn: Philanthropy Department, P.O. Box 1200 Santa Barbara CA 93102, or pray for the Dodgers."
Company Press Release

LOS ANGELES, Nov. 17, 2011 -- Jon B. Lovelace, who guided The Capital Group Companies Inc. as it grew to become one of the largest investment management firms in the United States, with more than $1 trillion under management, died yesterday after a long illness, his family announced. He was 84.

Under his guidance The Capital Group, which had been started by his father, Jonathan Bell Lovelace, and which he joined in 1951, became a pioneer in international and global investing and initiated the multiple portfolio system of asset management.

"For many of us Jon Lovelace represents Capital," said James Rothenberg, non-executive chairman of The Capital Group Companies who worked with Lovelace for almost 40 years. "His legacy is an organization of incredibly talented people, great integrity, a unique approach to the investment challenge, and a culture that is broadly admired. He touched so many lives in so many positive ways."

Lovelace helped initiate one of his most influential innovations, the Multiple Portfolio Counselor System, in the 1950s. Built on the insight that there are many ways to invest successfully, it is the cornerstone of the way the Capital Group manages assets today. Under the system, the assets of each fund are divided among multiple investment professionals who invest according to their strongest conviction and are compensated by the returns they generate for investors and clients as well as how well the fund does. Blending individual responsibility and collaboration, the system was a radical departure from the single-manager system and is increasingly emulated in the mutual fund industry.

Throughout his tenure, Lovelace helped Capital resist fads and trendy investment ideas such as Internet funds that blossomed in the late 1990s and eventually hurt investors. Instead, he emphasized investing for the long term and helped establish practices that reinforced his beliefs. Under his guidance, the firm adjusted its compensation for investment professionals, putting emphasis on longer rolling periods instead of the single-year results that are common in the industry.

Former U.S. Senator Bill Bradley remarked on Lovelace's quiet style. "I met Jon in 1978 — a quiet visionary who led by example. I was fortunate in countless ways to call him a dear friend. His modest selflessness and clear thinking always amazed me. More than building one of the world's great financial institutions, he was one of the most admirable human beings that I have ever known."

Lovelace was born in Detroit in 1927. His family moved to Los Angeles in 1929. He attended Beverly Hills High School and the Hotchkiss School, then left to join the Navy during World War II. After the war, he attended Princeton University and graduated cum laude with a degree in economics. He and Lillian Pierson were married in 1950 and have four grown children and six grandchildren.

Lovelace joined the Capital Group as a statistician and became a portfolio manager in 1953. During his tenure at The Capital Group, the mutual fund industry underwent profound change. In 1964, when Lovelace became Chairman of Capital Research and Management Company, the investment adviser to the American Funds family of mutual funds, few American families even knew about mutual funds. Today more than 44% of American households have mutual fund investments. Over that same time span, the organization grew from managing about $740 million to managing more than $1 trillion today. In 1964 the firm had 80 employees and four funds. Today, the organization employs more than 7,500 people worldwide, offers 33 mutual funds, a college savings program, target date retirement funds and manages institutional mandates.

His first choice of a career was not investment management, however. After graduating from Princeton University, where he studied economics and psychology, he went to work for Pacific Finance Company in the personnel department. He was convinced to join Capital in 1951, when the firm was undergoing re-organization.

His profound skills in managing people first became manifest in 1964, when he became president of Capital Research and Management. His insights helped create Capital's unique culture, its egalitarianism that shuns corner offices, and with a fluid system of collegial organization that encouraged creativity and collegiality.

Described as brilliant and humble, he and his consensus-building approach and deferential style of leadership are credited by colleagues as the reason for the firm's low-key culture. Probably Lovelace's greatest talents were his organizational skills. Although he may not have been directly responsible for many of the innovations that happened under his stewardship, such as the firm's early entry into international investing and emerging markets, he created a climate of innovation in which they could occur.

His egalitarian approach to management and the fluid system of organization that he inspired encouraged creativity and laid the foundation for the success of some of the firm's most innovative ideas.

Lovelace was an important philanthropist who gave time, effort and money to support the arts, education, health, science, and the environment. He held key positions at many of Southern California's most important civic, cultural and education institutions. He was Chairman of the J. Paul Getty Trust from 1988 to 1993 the period during which the new J. Paul Getty Center was being built. He was Chairman of the Board of Trustees of Claremont McKenna College from 1973 to 1976. He was a founding trustee and later served as Chairman of the Board of Trustees of the California Institute of the Arts, a school based on an idea by Walt Disney to develop a multi-arts degree-granting institution.

Despite his very active role in shaping the mutual fund industry as it is today, and his contribution to the community, Lovelace was not well known by the public. He shunned the spotlight.

Television and movie producer Norman Lear, a friend of more than 20 years, said, "You never read about Jon Lovelace but he probably has done more good in the world that can be imagined. Any number of times I joined an organization that I was attracted to and found that Jon and Lillian Lovelace were at the very foundation of the cause."

Although Capital was very successful under his leadership, Lovelace's colleagues say their strongest memory of him are his humanity, his desire to contribute to the community and his willingness to share his time and mentor to younger associates. "He was an extraordinary and understated gentleman," said David Fisher, Chairman Emeritus of Capital International Inc. who worked with Lovelace for nearly four decades. "His values have been the cornerstone of Capital and I hope they will continue to permeate the company in the future."

Lovelace himself encouraged his colleagues to continue striving for excellence. In 1996, celebrating the firm's 75th anniversary, Lovelace said, "It's very satisfying to see how far Capital has come, but it's a continuing challenge to maintain it. There's a phrase I've always loved. 'Nothing wilts faster than laurels rested upon' And the key is not to rest on our laurels, but to keep achieving."

"He was always fascinated by numbers," his daughter, Carey Lovelace said. "He always kept score at baseball games and if you gave him a date in history, he could figure out what day of the week it was. 'It isn't as hard as it looks,' he told my brother Jeff, once. 'I figured out an algorithm to do it.'"

An aficionado of Dixieland jazz, Lovelace wrote song lyrics in college ("No One Who Knew You Will Know the New You.") and was interested in folk music from the early 1950s and was a fan of Pete Seeger and the Weavers.

A dedicated environmentalist and avid hiker, Lovelace was instrumental in helping The Yosemite Fund build and maintain hiking trails such as the Red Peak Path Trial and the John Muir Trail and restoring degraded areas to their natural beauty.

Lovelace was a major supporter of Public Radio International and the Idyllwild Arts Foundation. He helped fund the Ahmanson-Lovelace Brain Mapping Center at UCLA and, in a departure from his desire to donate anonymously, he allowed the institution to use his name. In 1997 in recognition of his international philanthropy, Queen Elizabeth II made him an Honorary Commander of the Order of the British Empire

Asked once what his secret of success was, Lovelace quoted his own father and said, "Don't be greedy."

He is survived by his wife Lillian, his daughter Carey Lovelace and three sons, Jeffrey, Jim and Rob, and six grandchildren.

In lieu of flowers, the family requests that donations be made to the Sansum Clinic, attn: Philanthropy Department, P.O. Box 1200 Santa Barbara CA 93102, or pray for the Dodgers.

SOURCE The Capital Group Companies Inc. 

Edited by: Armie Margaret Lee

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