Last week I had the privilege of being selected to attend the advisory council meeting with the American Funds Group in San Francisco.  Along with other experienced advisors throughout the country, I also met with the portfolio managers and analysts of American Funds.  This trip provided great insight into current market conditions, potential changes in laws that may affect the financial industry as well as a great perspective of their superior long-term investments results.  We have entrusted American Funds with our client's investment assets for nearly five decades and upon the conclusion of this conference, I maintain a strong conviction in the investment approach, culture and dedication of the American Funds management team.

 

To provide perspective on topics that were covered, I thought I would share some highlights from the meetings:

1. Research - In 2014, American Funds analysts and portfolio managers collectively made more than 2,000 research trips resulting in over 8,000 meetings.  The total years of experience of these investment professionals exceeds 4,000 years.
2. Active -vs- Passive Management - There was a great amount of time spent covering the long debated issue of active -vs- passive management.  American Funds has a long history of outperforming their respective indexes. Please see the attached information regarding this topic by clicking on this link here.
3. Law Changes - The Department of Labor (DOL) has proposed a new law surrounding the Fiduciary Rule for Retirement Plans and IRA's.  Some of the components of the proposal would be harmful to the typical investor.  American Funds has voiced their concern on behalf of its shareholders directly with the parties responsible for creating these proposed changes.  The final proposal is not due out until early July.  We will keep a close eye on this proposal and follow up with updates as they become available.
4. Global Economy/Equity Markets - Although there is rarely a consensus among managers at American Funds, the general feel was relatively positive for global economies.  Coming out of the recession, the US has led the economic recovery and that is likely to continue.  Economic conditions are showing signs of improvement in developed Europe.  Stock valuations in the US appear to be fairly valued while international stocks are somewhat undervalued.
5. Bonds/Interest Rates - The Fed will likely increase the Federal Funds Rate before year-end.  However, it is not likely that it will be a large increase.  Bond yields will remain near historic lows.  The American Funds recent focus is on the intermediate part of the curve as well as Treasure Inflation-Protected Securities (TIPS).  Municipal bonds remain attractive relative to their taxable counterparts and although the US rates are historically low, they are still much higher when compared to other developed countries.

I would like to close my recap with a quote that came from the final meeting - "Where you spend your time is a reflection of your priorities."  I can assure you that American Funds management spends their time and efforts trying to deliver superior investment results to their shareholders.   Additionally, our time at WWK will continue to be spent searching for the best investment management for our clients because our client's needs come first.

 

Regards,

 

Dan Welch

President, WWK