By Canada Life Investment Management | Sept. 22, 2023

Kathrin Forrest, Equity Investment Specialist with Capital Group, underscored the importance of her team’s approach and research, the power of global investing and how your clients can benefit from the Global Equity fund.

What’s in this article:

1. The Capital Group advantage
2. Capital Group’s investment philosophy
3. The Capital System
4. Global research capabilities to power a global portfolio
5. The research portfolio
   

Capital Group is one of the largest investment management organizations in the world, boasting approximately US$2.4 trillion in assets under management.¹ They’ve been helping clients reach their financial goals for more than 90 years by focusing on long-term results and building high-conviction portfolios.  

This history and their experience gives them the perspective and knowledge that’s needed to keep a cool head when the markets are tough. In fact, the majority of Capital Group’s portfolio managers and analysts have honed their approach over several market cycles. Nearly nine out of 10 portfolio managers have at least 20 years in the industry, and more than a third have over three decades of experience.

Capital Group believes their long-term approach to investing is aligned with client goals. That’s why their culture and incentives reinforce that focus. As an independent, privately owned firm, they’re driven by superior, long-term outcomes. 

The compensation structure for portfolio managers involves increasing weight being placed on reporting periods of up to eight years. This encourages them to follow a long-term investment approach. High-conviction investments may be based on developments or prospects that can take years to play out, which is why it’s so important to have the right incentives in place.

From a cultural standpoint, Capital Group associates are significant investors in the company’s investment offerings. In the investment world, it’s important that the chefs taste their own cooking. This helps to tightly link their interests with clients’ goals.

Capital Group believes that high-conviction ideas and strong diversification lead to superior long-term results. The Capital System™, their proprietary investment approach, divides portfolios into segments run by individual portfolio managers. This multi-manager system creates a complementary mix of investment expertise and areas of focus.

In this sense, the Capital System bears some similarities to a team approach. But there’s an important difference: while there may be group discussions, there are no group decisions. Portfolio managers even have the flexibility to invest without a predetermined level of diversification or sector weighting. One may have a very concentrated portfolio, while others may maintain a longer list of investments. Individual portfolio managers are held accountable for their results over time, and a multilayered governance structure oversees the portfolio so they can act with confidence.

The Global Equity fund focuses on multinational or global companies that have a significant share of sales and operations outside the country in which they’re based. Capital Group takes care not to view the world in a narrow, regional context – as some parts of the markets or smaller firms may do. They use their global research platform to manage the portfolio and diversify opportunities across a variety of regions and sectors.

Capital Group’s portfolio managers and analysts conduct thousands of company research visits in emerging and developed markets every year. They focus on evaluating governance, financial strength, resources, products, services, potential future earnings and dividends. By developing relationships with business owners, government officials and industry specialists, they can glean insights on the broader market down to specific stocks.  

“Bottom-up” fundamental analysis of companies is at the heart of their approach, but that doesn’t mean they ignore the “top-down” perspective on opportunities. They combine on-the-ground research with macroeconomic analysis across asset classes. Other considerations include social, economic, cultural, political, industry and currency factors.

Autonomy is a key part of its research process, too. Instead of standardized valuation criteria, a mandatory screening process, or an overriding macroeconomic model, analysts are empowered to find or create the financial model they believe best characterizes the industry they cover.

Capital Group integrates all of this research to build portfolios on a stock-by-stock basis, looking to capture value that the market hasn’t recognized. Since their philosophy is focused on long-term gains, not short-term swings, they look for companies with attractive valuations that can be core holdings for many years.

Capital Group doesn’t only spread portfolio construction across portfolio managers – analysts also manage a portion. This “research portfolio” can range in size but is generally about 20% of a portfolio’s assets. Directly involving analysts in the decision-making process adds a variety of high-conviction opportunities and provides another layer of diversification.

Talk to your Canada Life wealth wholesaler today to find out how you can put Capital Group’s expertise to work for your clients with the Global Equity fund.

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The views expressed in this commentary are those of Capital Group as of Sept. 14, 2023, and are subject to change without notice. This commentary is presented only as a general source of information and is not intended as a solicitation to buy or sell specific investments, nor is it intended to provide tax or legal advice.

This fund is available through a segregated funds policy issued by The Canada Life Assurance Company. A description of the key features of the segregated fund policy is contained in the information folder. Any amount allocated to a segregated fund is invested at the risk of the policyowner and may increase or decrease in value.

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