News On American Funds

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munytalks's picture
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Hey Kool Aid kids, why don't you go to MSN.com and look up the article titled JUMBO Mutual Fund Starts to Tumble.... and then send a wire to your research department and see if they answer why EDJ continues to push American Funds - you know that fund you NEVER have to apologize for... when EDJ has had a sell on Altria for years...
They answered my question. Maybe they will now.

troll's picture
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munytalks wrote:
Hey Kool Aid kids, why don't you go to MSN.com and look up the article titled JUMBO Mutual Fund Starts to Tumble.... and then send a wire to your research department and see if they answer why EDJ continues to push American Funds - you know that fund you NEVER have to apologize for... when EDJ has had a sell on Altria for years...
They answered my question. Maybe they will now.

 
Seriously? A sell on MO?

munytalks's picture
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MB- Yep . Serious. Dead Serious. Skrainka issued a sell years ago. I asked SEVERAL times about the implications of a Sell on a stock that was the number one holding of FIVE (at the time) American Funds most used funds and was given the geep double talk sqawk. NOW I know why.  
So how about it? Any Kool Aid lovers say I am wrong?

compliancejerk's picture
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munytalks wrote:
Hey Kool Aid kids, why don't you go to MSN.com and look up the article titled JUMBO Mutual Fund Starts to Tumble.... and then send a wire to your research department and see if they answer why EDJ continues to push American Funds - you know that fund you NEVER have to apologize for... when EDJ has had a sell on Altria for years...
They answered my question. Maybe they will now.

 
Please provide the link

Maxstud's picture
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munytalks wrote:
Hey Kool Aid kids, why don't you go to MSN.com and look up the article titled JUMBO Mutual Fund Starts to Tumble.... and then send a wire to your research department and see if they answer why EDJ continues to push American Funds - you know that fund you NEVER have to apologize for... when EDJ has had a sell on Altria for years...
They answered my question. Maybe they will now.

 
EJ on MO sale issued 2nd qtr 2003, hold issued 1st qtr 2005.
MSN article excerpt:
"Most investment advisers shop for funds among the top 25% of their categories, in the belief they are most likely to sustain above-average performance. Three of American’s biggest funds meet this standard.But three do not, and advisers ordinarily shun such laggards because they are most likely to continue to underperform."
Wow sounds like the titanic all over again....everyone let the women and children sale their shares first there are plenty of sale tickets for everyone!
 

Maxstud's picture
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dang mispelled sell three times...

munytalks's picture
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Let's see.... SELL in 2003.... then to a HOLD in - did you say FIRST QTR 2005- would that be after the WSJ article on Revenue Sharing came out in December 2004? I smell a BIG GREEN RAT.... with a $210 Million Dollar stash of cheese somewhere..
If memory serves me right, the reason for the sell opinion was due to mounting law suits- which are still unsettled.
Oh , and you forgot the tag line to the article " Some American Funds are great and some are not. Investors pay brokers so they don't have to make such choices themselves. They are being punished."
I suppose now Timothy Middleton is a moron.

munytalks's picture
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Sorry ComplianceJerk- can't do the link thing. I am not new to the biz- but am a Technology Nit-wit. Can anyone help me out on this request?

Maxstud's picture
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I never said he was a moron, I chose to quote a fact from the article you chose to quote an opinion.  I would have to say Mr. Middleton is a journalist with a nice flair for the dramatic, which is what he gets paid to do.  Nicely done Mr. Middleton!
By the way maybe that big green rat you smell is your lunch, have you check to see if your fridge is working?

Indyone's picture
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Mutual FundsAmerican's funds stall as assets soar

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< id=dapIf1 src="about:blank" Border=0 width=300 scrolling=no height=250>At the huge mutual-fund family of American Funds, capital is pouring in even while the performance of some of the funds slips.By Timothy MiddletonSuccess is beginning to spoil the giant mutual-fund family of American Funds. This outstanding fund family attracted so many assets in the last two years -- $169.35 billion worth -- that the flows by themselves would have made it the sixth-largest fund complex in the nation.As it is, American Funds is the second-largest, after Vanguard Group, according to Financial Research Corp. (FRC). It accounts for six of the 10 largest funds in the industry. But there are signs American Funds’ leadership is being overwhelmed by too many assets to manage.

Start investing with $100.Explore ournew ETF center.It is the largest shareholder of a host of American corporations, including Altria Group (MO, news, msgs), AT&T (T, news, msgs), Lowe’s (LOW, news, msgs), Target (TGT, news, msgs), Fannie Mae (FNM, news, msgs) and BellSouth (BLS, news, msgs), making it essentially impossible to exit a damaged stock without suffering enormous damage itself.American says it gets around the size issue by adding investment professionals at the rate of 8% a year, and by assigning only a portion of a fund’s assets to any one person. “On the American Funds Growth Fund of America A (AGTHX), there are nine portfolio counselors,” says Chuck Freadhoff, the firm’s spokesman, “so no one individual is managing a particularly huge slice of the pie.” “American has one of the best models for handling asset growth,” says Russel Kinnel, director of fund analysis for Morningstar. “The bad news is that even they have their limits. It’s a little worrisome when you see this rate of growth.”

Indyone's picture
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whoops...here's the rest...
Signs of slippageThe situation at American is far from acute; many of its funds remain in the top tier. But others, including individual funds that each hold more assets than most mutual-fund companies, have seen their performance slip as money has flooded in.It’s not hard to see why American has grown so large. It has little competition among broker-sold funds. In-house funds run by giant brokerage firms such as Merrill Lynch and Morgan Stanley tend to have poor records. Among independent broker-sold funds, some of the best known -- including Putnam Investments and MFS Investment Management -- were tarred in the mutual-fund scandals of 2003 and are still losing assets, according to FRC. But it’s also not hard to see that, as American's funds have gotten bigger, some of them have faltered. When its American Funds Income Fund of America A (AMECX) had $24.56 billion of assets in 2003, it ranked among the top 14% of funds in Morningstar’s moderate-allocation category. Now, with $64.29 billion, it has tumbled to the 75th percentile.Asset bloat at American has been nothing short of astonishing. Three years ago, Pimco Total Return A (PTTAX) was the largest mutual fund, with assets of $72.61 billion. Today it has grown 27.1% but has fallen to No. 3. American's Growth Fund of America A, which was fifth-largest then, has leap-frogged into the No. 1 spot with asset growth of 258%.

  American – six of the 10 largest mutual funds

Fund
Assets today
Assets 3 years ago

American Funds Growth Fund of America A (AGTHX)
$136.75 billion
$38.20 billion

Vanguard 500 Index (VFINX)
$109.42 billion
$66.82 billion

Pimco Total Return A (PTTAX)
$92.23 billion
$72.61 billion

American Funds Invest Co of Amer A (AIVSX)
$81.14 billion
$47.78 billion

American Funds Euro Pacific Grade A (AEPGX)
$77.89 billion
$22.68 billion

American Funds Washington Mutual A (AWSHX)
$77.83 billion
$44.24 billion

Vanguard Total Stock Mkt Index (VTSMX)
$68.95 billion
$19.85 billion

American Funds Income Fund of Amer A (AMECX)
$64.29 billion
$24.56 billion

Fidelity Contrafund (FCNTX)
$63.83 billion
$26.82 billion

American Funds Capital Inc Builder A (CAIBX)
$61.73 billion
$14.10 billionNotes: As of 3/31/2006. Excludes money-market funds. Source: Morningstar.Among giant stock funds, the only non-American fund that is actively managed, Fidelity Contrafund (FCNTX), is acknowledging the dangers of too much growth by closing to new investors at the end of this week. Fidelity closed Fidelity Magellan (FMAGX) years ago, but not before performance deteriorated. American has never closed a fund.Big stakesSize by itself is much less of a problem for index funds, which account for the other two giant equity funds. Pimco Total Return A, an actively managed bond fund, has continued to beat its benchmark, the Lehman Brothers U.S. Aggregate Bond Index, for nine of the last 10 years, the exception being 2002 when it trailed by 0.06%.American Funds, managed by Capital Research & Management, gives about 75% of a fund’s assets to a large team of managers, generalists who are free to invest as they wish. The other quarter of assets are handed over to industry analysts to invest in their best ideas. Freadhoff says Capital Research has about 150 portfolio managers and analysts, and that they are strong-willed and independent. Still, all the largest domestic-equity funds have a strong value bias, and managers are certainly drawn to many names in common. It owns huge positions, nearing 15%, in many large corporations.It is the largest or second-largest shareholder in nine of its top 10 positions.

  American Funds’ top holdings

Stock
Ownership

Altria Group (MO, news, msgs)
7.8%*

Microsoft (MSFT, news, msgs)
3.6%**

General Electric (GE, news, msgs)
2.4%

AT&T (T, news, msgs)
7.9%*

Citigroup (C, news, msgs)
3.3%**

Lowe’s (LOW, news, msgs)
14.9%*

Target (TGT, news, msgs)
14.2%*

Fannie Mae (FNM, news, msgs)
13.6%*

Google (GOOG, news, msgs)
5.6%**

BellSouth (BLS, news, msgs)
12.1%*Notes: Reflects percentage ownership of corporation, not fund assets. * Largest shareholder. ** Second-largest shareholder. Sources: MSN Money, Morningstar. Safe, but not the best choiceTo paraphrase something that was said of IBM (IBM, news, msgs) in the 1960s, no broker ever got fired for recommending American Funds. Their expenses are among the lowest in the industry, even after taking sales commissions into account. Their management is squeaky clean. Many American funds are top performers.The problem is, some are not, and indeed have experienced performance falloffs in recent years, as shown by the table below.

  Performance slows

Funds by category rank
3 years
5 years
10 years

American Funds Growth Fund of America A (AGTHX)
6
4
2

American Funds Invest Co of America A (AIVSX)
76
48
16

American Funds Euro Pacific Grade A (AEPGX)
14
9
4

American Funds Washington Mutual A (AWSHX)
87
54
26

American Funds Income Fund of America A (AMECX)
16
5
12

American Funds Capital Inc Builder A (CAIBX)
44
29
23Notes: As of 3/31/2006. Scale = 1 is best, 100 worst. Source: Morningstar.Most investment advisers shop for funds among the top 25% of their categories, in the belief they are most likely to sustain above-average performance. Three of American’s biggest funds meet this standard.But three do not, and advisers ordinarily shun such laggards because they are most likely to continue to underperform. That has been true in spades of American Funds Invest Co of America A (AIVSX) and American Funds Washington Mutual A (AWSHX), yet investors have flooded them with $33.36 billion and $33.59 billion, respectively, in fresh assets in the last three years. It's possible that brokers have been putting so many of their clients in these underperforming funds because commissions paid by investors go down as more assets are placed with a single company. Brokers have told me their own compliance officers have ordered them to choose funds within the same family for this reason, even though better alternatives exist with other fund companies.But that’s an issue of how brokers get paid, and it should be the furthest consideration from an investor’s mind. Some American Funds are great and some are not. Investors pay brokers so they don’t have to make such choices themselves. They are being punished. At the time of publication Timothy Middleton owned or controlled the following securities mentioned in this article: Vanguard Total Stock Market Index Fund.

munytalks's picture
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Thanks Indy!
Max- I didn't say YOU called Middleton a moron- I have noticed that is a word of choice among Kool Aid lovers when someone voices an opinion not adopted in St. Louis.
 

babbling looney's picture
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It's possible that brokers have been putting so many of their clients in these underperforming funds because commissions paid by investors go down as more assets are placed with a single company. Brokers have told me their own compliance officers have ordered them to choose funds within the same family for this reason, even though better alternatives exist with other fund companies.
This is a significant part of the article which just reinforces why we need to get away from a commission based practice.  The A share rules have created a monster and a real lack of flexibility in client's portfolios under the guise of saving the client on commissions.   Nothing like the government for being able to f**k up something in the misguided attempt to "fix" it.
Just wait until they try to "punish" big oil for market flucations in crude oil and the lack of refining capacity (which is also big government's fault).    Hang on to your hats!!! the economy is going to tank and oil will be higher than ever and gasoline scarcer than ever if we let those clowns in government, who haven't the slightest clue about economic, handle this.

troll's picture
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Maxstud wrote:
EJ on MO sale issued 2nd qtr 2003, hold issued 1st qtr 2005.
UNREAL

Soothsayer's picture
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Maxstud wrote:
EJ on MO sale issued 2nd qtr 2003, hold issued 1st qtr 2005.
Skrainka is a freakin' genious! 

exdrone's picture
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MO will face a death from a thousand pecks and WCOM is the toll booth on the information superhighway.  At least Skrainka has decent teeth... buy that hairdo is something else. 

rightway's picture
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I am not a big American Funds fan, in the last decade or so they have
overperformed in rough markets and underperormed in up markets. 
The fact they are falling short in areas and as a firm, "feeling rather
bearish", makes me wonder whether "reversion to the mean" would tell us
NOT to abbandon them.  I am not a contrairian, but my experience
as been as soon as everyone is on the bus...get off.  You could
not get enough American Funds after the market correction in 2000
(because they held up so well) then the market turned and many of their
funds diddn't keep up (nothing new).

Is this the time to fire them or hire them? Just a thought.

troll's picture
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exdrone wrote:
MO will face a death from a thousand pecks ....
Well, death seems to suit MO pretty well then. Since that guy issued his sell, 2QTR, '03 (looks like he picked the absolute bottom) the stock's gone from $27/shr to $71.85/ before todays' open.
 
No wonder they love buy and hold so much, they can't pick stocks 

troll's picture
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Biography - Alan Skrainka

 

Alan Skrainka has been with Edward Jones' Research Department since 1982. In 1996, he joined the Investment Policy Advisory Committee as the firm's chief market strategist.
Alan has been widely quoted in such major publications as The Wall Street Journal, Money magazine, Investor's Business Daily, USA Today, Barron's and Business Week, and has appeared on CNBC and the PBS Nightly Business Report.
Alan earned a bachelor's degree in business administration from the University of Missouri-St. Louis in 1983 and an M.B.A. from Washington University in St. Louis in 1990.
 
Where else could you be a "Chief Market Strategist" with that resume?

exdrone's picture
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I can think of 2 places mike.  Primerica and WMA.  The reason he's the Chief is that he's the only one without an MBA from St Louis Univ.  He actually went to a top 25 business school albeit barely at #23.  Jones has a virtual degree mill at SLU for the GP masses that come out of the greatest salesforce.  No woner they never have an original thought.

exdrone's picture
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Soothsayer wrote:Maxstud wrote:
EJ on MO sale issued 2nd qtr 2003, hold issued 1st qtr 2005.
Skrainka is a freakin' genious! 

In the context of his colleagues at Jones, he's a freaking oracle.

bankrep1's picture
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People said the same thing about american funds in the 1990's.  As far as the A share thing I agree I use alot of C shares now I am being told not to do that and if I do it better be in one family?  What is the point of it?

Indyone's picture
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I would agree that WAMU (which I've used) and ICA (which I've never used, oddly enough) should probably be swapped out as underperformers.  Even though there are concerns at AmFunds like lots of other fund families, I would consider a swap to another stronger performer in the family, although perhaps not in the same asset class.  Fundamental Investors is a decent value fund, Growth Fund continues to show pretty good numbers, even with the asset bloat concern, and New World is a more conservative way to play emerging markets.  If you just don't like 'em and the client doesn't mind paying the load again, there are plenty of better choices on the outside also.

ezmoney's picture
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Bankrep,
 
remember you work for a bank. Whatever they say won't make sence and will probably benefit them in some way.

Devoted SA's picture
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I remember a story my rep told me about a training session she went to as a New IR at American Funds.
They were teaching the ICA story, showing mountain charts and talking about the top holdings of their top funds...at question and answer time she raised her hand and asked "Isn't that what's called overlap?"
She said the way the speaker and New IR Support Specialists looked at her you would have thought she said "let's strip your mother naked and sell her on the street!" After that I didn't have to stock many American Funds prospectus in the office.

bankrep1's picture
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EZ,
I work for a credit union.  Are you still pissed at BOA you gotta find a new gig negativity will kill you!

Revealer's picture
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Devoted: Overlap. What's that? (Good question for the jones reps to answer.) Yeh, go ahead and answer it. 

Maxstud's picture
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Revealer wrote:Devoted: Overlap. What's that? (Good question for the jones reps to answer.) Yeh, go ahead and answer it. 
I hear a lot about overlap in American Funds from different people but I have to say that when I put together a portfolio using Morningstar Instant X-ray I never have more then 17% or 18% overlap with American Funds.  While with other fund companies It's tough to get under 25%.  In fact there was a thread a while back where Big Payday gave a sample American funds portfolio and everyone was screaming overlap.  Babbling Looney ran an X-ray and found the overlap to be quite low.

csmelnix's picture
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I'm not trying to be a jerk here Max...but frankly, a roughly 20% overlap is in my mind is quite high.  I think you say it's tough when you consider that products are limited and choices are so similar.

Maxstud's picture
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csmelnix wrote: I think you say it's tough when you consider that products are limited and choices are so similar.
 
Agreed

rightway's picture
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Maxstud wrote:Revealer wrote:Devoted: Overlap. What's that?
(Good question for the jones reps to answer.) Yeh, go ahead and answer
it. 
I hear a lot about overlap in American Funds from different people
but I have to say that when I put together a portfolio using
Morningstar Instant X-ray I never have more then 17% or 18% overlap
with American Funds.  While with other fund companies It's tough
to get under 25%.  In fact there was a thread a while back where
Big Payday gave a sample American funds portfolio and everyone was
screaming overlap.  Babbling Looney ran an X-ray and found the
overlap to be quite low.

Look at the correlation, not overlap.  This is where the American
Funds get scary unless you know what you are doing in terms of putting
the portfolios together.  Mutual Funds suck anyway.

babbling looney's picture
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rightway wrote: Maxstud wrote:
Revealer wrote:Devoted: Overlap. What's that? (Good question for the jones reps to answer.) Yeh, go ahead and answer it. 
I hear a lot about overlap in American Funds from different people but I have to say that when I put together a portfolio using Morningstar Instant X-ray I never have more then 17% or 18% overlap with American Funds.  While with other fund companies It's tough to get under 25%.  In fact there was a thread a while back where Big Payday gave a sample American funds portfolio and everyone was screaming overlap.  Babbling Looney ran an X-ray and found the overlap to be quite low.
Look at the correlation, not overlap.  This is where the American Funds get scary unless you know what you are doing in terms of putting the portfolios together.  Mutual Funds suck anyway.
That is why you would want to be able to offer low correlated assets such as REITs and Floating Rate Senior Loan Funds, among other things.  You can get a fairly low overlap, even in American Funds, but it is hard because they have so few funds.   On the American Funds web site they even have a grid you can print off that will show you the overlap that they have in their own funds.   You need another tool, such as the Morningstar X Ray to get the same overview of a more diversified portfolio.   20% overlap is just much to high.

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