Cap Group Shakes up American Funds Institutional Sales
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Tuesday, November 29, 2011

Cap Group Shakes up American Funds Institutional Sales

The sister company to the American Funds sponsor Capital Research & Management [profile] is in full-swing turnaround mode. Part of Capital Guardian Trust's strategy, reports trade pub Pensions & Investments, has been the creation of a new unit to help sell American Funds mutual funds to institutional clients.

That new arm is Capital Group Institutional Investment Services and it will help coordinate sales and servicing efforts between the two companies. Previously, American Funds sponsor Capital Research and Capital Guardian had each kept its own institutional sales efforts.

Shaw Wagener, chairman of Capital Group International Inc., told the trade publication that the firm finished a reorganization at the end of the summer. The changes include attempts to both improve its investment performance and change the services it brings its clients. For example, many institutional investors think of Capital Guardian as an equity shop despite its having 20 percent of its assets in bonds.

Wegener explained that the groups are now unified and that there will no longer be two teams calling on institutional clients.

He told P&I that "It used to be in the old days, when an institutional client would want to talk to us about mutual funds, it would be a whole different group who would come and talk to them. If they wanted to talk about a separate account for a defined benefit plan, it would be a whole different person who would talk to them about that,"

The move comes as American Funds continues to see large outflows. From the start of the year through November 17, Lipper reports net outflows of $65.4 billion. That is already ahead of 2010's total net outflows of $55.9 billion.

The regrouping by Capital Guardian comes as the Los Angeles firm has lost nearly two-thirds of its AUM from its peak in 2007. Today, it had $43.9 billion of AUM at the end of October. Meanwhile, its client base has dropped to 354 from 464 at the close of 2007.

One big issue at the firm was poor relative investment performance in recent years. Another is the increasing short horizon of institutional investors.

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