Capital Group are honoured to be named Best Fixed Income Asset Manager at the inaugural Australian Wealth Management Awards. This recognition is a significant milestone for our growing fixed income business in Australia, and we are focused on helping our clients achieve their long-term financial goals.
Describe the last 12 months that led Capital Group to win this award?
Capital Group has been managing fixed income strategies for over 50 years, with a focus on delivering superior results for clients across a range of market conditions. In the last decade, the firm has expanded its global reach and capabilities – investing significantly in risk and trading systems, doubling the size of our fixed income team to 246 investment professionals, and more than doubling assets under management to over A$507 billion.
Capital Group is now the fourth largest active fixed income manager in the world, with a track record of delivering strong investment results across most sectors of the fixed income market.
Specifically in Australia, we have stepped up our efforts to ensure our fixed income funds are available to local investors. In the last 12 months, we have launched a new fund, Capital Group Multi-Sector Income Fund (AU), attained strong ratings from local research houses, increased platform availability and, for the first time, hired a locally based fixed income investment director. We are excited about the growing reach of our investment capabilities in the local market.
What differentiates Capital Group from competitors in this asset class?
Capital Group distinguishes itself from our peers through our bottom-up approach to fixed income investing. While common in equities, this approach is unusual in the fixed income world where many fund managers take a more top-down approach, allocating across sectors and countries based on their macroeconomic outlook.
At Capital Group, our approach is to build portfolios bond by bond from the bottom up. While the macro is of course an important input (we have a team of 17 macroeconomists supporting our investors), the real driver of our strong investment results is the strength of our bottom-up, fundamental research at the company or sovereign level.
We have almost 60 specialist investment analysts around the world, who are the backbone of our investment process. Each analyst covers a specific sector of the credit or rates market, spending their days doing deep research and financial analysis, as well as travelling the world meeting companies, central bankers, and government officials to uncover new investment opportunities.
What’s particularly unique about Capital Group’s process is that our seasoned investment analysts are also investors. They are not just writing reports or recommending a buy or sell; they actually invest in their highest convictions in our funds. In other words, the specialists closest to the companies and sovereigns issuing bonds are the ones making investment decisions.
The outcome for our clients has been not only strong investment results, but also results that are quite consistent across market cycles. Within our Luxembourg-domiciled UCITS fund range (not available to Australian investors), eight of our fixed income funds have long-term track records (8 years or longer).
How do you innovate and stay ahead of industry trends?
Innovation is critical in our ever-changing world. And for us, this is anchored in how we can best serve our clients around the world.
Today, a common theme we hear is that our clients want fewer, better partners. They prefer dealing with only a handful of asset managers who they can trust and who can solve for a range of different needs.
So, this is what we are striving for and what drives a lot of the innovation at Capital Group. It began many decades ago with our expansion from equities into fixed income, multi-asset and retirement solutions.
More recently, we have been focusing on increasing accessibility of our investment services through more vehicles – the launch of our active ETF (exchange-traded fund) platform in the US is a perfect example.
And looking forward, we are excited to have recently announced a partnership with KKR to bring hybrid public-private strategies to our clients.
What is the toughest challenge the business has faced in the last 12 months? How was it overcome?
As an asset class, traditional fixed income has been in the doldrums for a while – really for much of the last decade. With zero interest rates and quantitative easing, returns were very low and the value proposition for traditional fixed income has been challenged in the eye of many investors.
Fortunately, this has now changed. Most importantly, the yield on offer in fixed income markets is near the highest level since before the global financial crisis. High-quality bonds are yielding 5-6% versus 1-2% just two years ago. It is likely that many central banks around the world will cut rates over the next few years, which could provide an additional boost to returns.
This is a game changer for fixed income investing and points to a much more exciting opportunity. In many ways, this is the fixed income market of old – the ability to embed a defensive anchor in a broader portfolio, while earning an attractive income along the way.
So, after a challenging 10 years (not just 12 months), our fixed income business is back in a much happier spot.
What are some of the goals for the next 5 years?
Capital Group has a clear mission – to improve people’s lives through successful investing – and that is what drives our business in Australia. We strive to continue delivering strong investment results across our investment strategies, and we aim to make them accessible to all investors who would benefit from them.
In the US, where we have an almost 100-year presence, over 20 million households are invested in a Capital Group fund. Eventually we would love to have a similar presence in Australia.
About Capital Group
Capital Group is one of the oldest and largest asset management companies in the world, managing multi-asset, equity and fixed income investment strategies for different types of investors. Since 1931, Capital Group has been singularly focused on delivering superior, consistent results for long-term investors using high conviction portfolios, rigorous research and individual accountability. Today, Capital Group works with financial intermediaries and institutions to manage more than US$2.5 trillion1 in long-term assets for investors around the world.
For more information visit capitalgroup.com/au/en/
Past results are not a guarantee of future results.
1 All data as at 31 March 2024 and attributed to Capital Group unless otherwise specified. Data as at 31 December 2023. Source: Capital Group. Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.
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