Ten years ago, nearly 5,400 US-domiciled mutual funds were available to investors. Today only around 36% of them are still in existence, according to Morningstar data. The chances of long-term investors picking funds that are later merged or closed are fairly high. The potential upside for investors when funds merge may include lower expenses and stronger funds. But, if a fund is transferred to another manager following a corporate merger, investors may be saddled with higher management fees. There could also be tax implications when a fund closes, and In some instances, the investment strategy or objective could change. Being selective when investing in funds is therefore important. Our research proposes that fund managers with a low record of merging or closing their funds are more likely to be aligned with investors’ long-term objectives. Better yet, their funds could produce stronger returns over the long run. Please see the attached investment insight for more information on this research by my colleagues.
Capital Group is one of the oldest and largest funds management groups in the world. Today, Capital Group manages US$1.7+ trillion in long-term assets for millions of individual and institutional investors around the world.