– With 91 years of existence, Capital Group is one of the oldest operating management companies in the world. With over $2,700 billion in assets under management, it ranks among the top 10 largest companies in the industry in the world. The American manager was awarded the prize for best management company of the year in France by the rating agency Morningstar at the end of March. But also in 11 other countries in Europe and Asia. A reward that “demonstrates the stability and good performance of our fund offering, coupled with the solidity of our investment teams,” Grant Leon, managing director, financial intermediaries, Europe and Asia at Capital Group, told NewsManagers.
The company has been present in Europe for 60 years and in Asia Pacific for 40 years. Although it has been working with financial intermediaries in the United States since the 1950s, Capital Group has only really focused on developing this business segment in Europe and Asia in the last decade. “Our strategy focuses on building long-term partnerships with key global financial intermediaries and key national players to serve investors in the markets where we operate. We have made tremendous progress over the past ten years and our business in Europe and Asia-Pacific has grown well. The Middle East is another region where we have been working for decades with institutional clients and, more recently, serving financial intermediaries. Some of the world’s largest financial intermediaries are also based in this region,” explains Grant Leon.
Capital Group plans to forge long-term relationships with its clients with the goal of “becoming the world’s first choice investment manager”. To achieve this, the Los Angeles-based company is “permanently investing” in its people, its products and its brand, assures Grant Leon. In Europe, which he considers to be the world’s second largest asset management market, Brexit has not changed anything for the company. Capital Group is expanding its portfolio of investment services, increasing support for distribution activities, strengthening regional leadership and deepening its presence through local offices (Frankfurt, Luxembourg, Milan, Madrid, Amsterdam, London, Geneva and Zurich ).
Active ETFs, a “natural evolution”
According to Grant Leon, what made all the difference in winning Morningstar’s Best Asset Manager award at the end of March in France and other countries was the “Capital System”. Portfolios managed by teams of managers with different but complementary investment styles, backed by analyst research. “Our investment approach differs from that of many of our peers. Experience has taught us that no single manager can be consistently successful across all market cycles. That’s why our investment process is based on highly experienced and complementary investment teams,” summarizes Grant Leon, emphasizing the absence of risk of a superstar manager, as well as the balance and diversification that this approach offers.
In terms of fund offerings, the company remains focused on long-term fundamentals and themes, favoring short-term trends. Since its inception in 1931, Capital Group has launched only about forty strategies worldwide. The US manager has also recently entered the world of exchange-traded funds (ETFs), which are currently only intended for US investors. “Our active ETFs are a natural evolution of our long history and the scope of our long-term investment strategies and results,” said Grant Leon.
ESG, Russia-Ukraine, the challenges
In terms of industry trends, the environmental, social and governance (ESG) criteria for Grant Leon remains “by far the most significant change I’ve seen in the industry in recent years”. Capital Group recently surveyed more than 1,000 global wholesale and institutional investors for its 2022 ESG Global Study. A survey in which nearly two-thirds (63%) of investors surveyed showed a preference for managers’ assets to make critical investment decisions, “which indicates the complexity of assessing ESG issues,” said Grant Leon.
“Investors are therefore turning to active managers who can focus on in-depth in-house research, robust monitoring systems and engaged dialogue with companies to analyze these. At Capital Group, we understand our fiduciary responsibility to consider all material factors when assessing the merits of an investment. ESG issues are critical factors in companies’ long-term prospects and are therefore at the center of our investment research and analysis,” he adds.
Another global challenge for the wealth management industry is the “tragic” invasion of Ukraine by Russia. Capital Group nevertheless remains focused on the long-term fundamentals and works closely with its clients as events unfold. In March, the company suspended the purchase of Russian securities in all of its investment strategies and put in place controls to enforce sanctions against Russia.
“Overall, our exposure to Russian securities, whether equities or bonds, represents an insignificant fraction – less than 0.01% – of our total assets under management. In the portfolios of Russian securities, our positions are weak,” emphasizes Grant Leon.