Capital Group is the latest fund provider to reduce fees on 18 of its funds by revising initial fee breakpoints. The change affects funds with current assets of less than $15 billion, and the investment company says that it could create potential savings of over $20 million for investors within the first year.
The move comes as efforts accelerate to reduce fees industry wide, which dovetails with a recent Morningstar report that found that the United States is one of the most investor-friendly markets in terms of fees and expenses. According to Capital, 93% of its fund management fees are now expected to sit in the lowest quintile of fees within its peer group, compared to its previous position in the 84th percentile in March.
Other industry research from the Investment Company Institute found that fees and expenses are falling, and details just how far over the past two-plus decades. It found that equity mutual fund expense ratios averaged 0.47% in 2021, compared with 1.04% in 1996, a major drop that, thanks to John Bogle’s concept of the “tyranny of compounding costs,” add up to a significant sum over time.
Mike Gitlin, a member of Capital Group’s management committee, noted that the firm “has a long history of sharing the benefits of scale with our fund shareholders through lower fees.”
Many of the funds affected are Capital Group’s fixed income funds, specifically its American Funds brand of products. Of the 11 fixed income funds with five year track records that will see lower fees, 9 are in the top two quartiles for results (or 82%). American Funds Multi-sector Income Fund, Capital Group’s newest bond fund which will also see lower fees. A total of 12 bond funds will experience reduced fees.
Gitlin noted that “consistent active management and lowering fees on our smaller mutual funds” helps achieve better investment results for investors.
The Capital Group manages more than $2.7 trillion in equity and fixed income assets worldwide.
SEE ALSO:
- Top Focus of 401k Plan Sponsors in 2022? Reviewing Fees
- 401k Fees Remain a ‘Black Box’ for Most Americans
Lynn Brackpool Giles is a contributing editor to 401(k) Specialist. Giles is a former Managing Director of Communications and Consumer Services for the Financial Planning Association (FPA), where she oversaw all corporate, legislative, and consumer communications. In her current journalistic practice, she is a frequent contributor to numerous financial services industry publications.
