American Funds Nets Most Cash
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Los Angeles-based American Funds remained the nation’s most popular stock and bond mutual funds in March, despite the company’s high-profile battles with regulators.
American Funds’ portfolios took in a net $7.2 billion in fresh cash last month, data tracker Financial Research Corp. in Boston said Wednesday. The total was down from $7.9 billion in February, but still was $2 billion more than that received by the second-most-popular fund company, Vanguard Group.
The cash inflows helped American Funds pass Fidelity Investments and become the second-largest U.S. fund company ranked by assets in stock and bond funds at the end of March. Vanguard was No. 1, with $713 billion in its long-term funds. American Funds had $672 billion and Fidelity had $667 billion, Financial Research said.
Including assets in money market funds, however, Fidelity is the nation’s biggest fund company.
American Funds has been the bestselling fund firm for the last three years. Its portfolios are sold exclusively by brokers and other financial advisors, and have a reputation for conservative management and strong long-term performance.
But two regulators this year have alleged that the company violated securities rules with certain marketing agreements it has had with brokerages.
The NASD, the securities industry’s self-regulatory group, on Feb. 16 accused American Funds of improperly steering stock-trading business to brokerages that pushed its funds to their clients from 2001 to 2003.
On March 24, California Atty. Gen. Bill Lockyer sued American Funds in state court, alleging that it failed to fully disclose to investors how it has paid brokerages to pitch its products.
Capital Group Cos., the parent of American Funds, has denied wrongdoing and is fighting NASD (formerly the National Assn. of Securities Dealers) and Lockyer.
Fund industry analysts have been watching to see whether the battles would cause some financial advisors to shy away from selling American Funds’ products. But the 9% drop in the company’s net cash inflow from February to March was less severe than the declines experienced by several other major fund companies.
Fidelity, for example, saw its stock and bond fund net inflows plunge 78% over the two months, from $2.2 billion to $477 million, according to Financial Research. T. Rowe Price Group’s stock and bond fund net inflow slid 29%, from $1.7 billion to $1.2 billion.
An American Funds spokesman said the company had no comment on its sales trends.
As stock prices slumped and interest rates rose in March, investors in general bought fewer conventional stock and bond fund shares, but bought more exchange-traded funds, according to Financial Research.
ETFs, which track stock and bond market indexes and trade like regular stocks on major exchanges, have become increasingly popular with investors and short-term traders over the last two years.
The so-called SPDR trust, an ETF that tracks the Standard & Poor’s 500 stock index, took in a net $3.2 billion in fresh cash last month, Financial Research said. By contrast, the bestselling mutual fund last month -- American Funds’ Capital World Growth and Income fund -- took in $1.6 billion.
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