May 21, 2004 — Vast assets haven’t kept Growth Fund of America/A (AGTHX) from maneuvering nimbly through challenging markets. With $57.4 billion in assets, the fund is one of the largest domestic equity funds in the U.S. Fine performance recently won its managers a 2004 Standard & Poor’s/BusinessWeek Excellence in Fund Management Award.
Growth Fund’s “consistency of approach and process has provided a strong performance record relative to its peers,” explains Rosanne Pane, Standard & Poor’s mutual fund strategist. The fund’s solid record is long standing. For the ten years through last month it has risen 14.1%, on average, versus an 8.5% gain for the average large-cap growth fund. The portfolio has been in the top quartile of its peers for seven of the last ten years.
Growth Fund has also performed competitively in the current bull market. For the one-year period through April, the portfolio rose 28.4%, versus 19.7% for its peers. Strong contributors to recent performance highlight the fund’s wide-ranging approach. Among its top ten holdings are Time Warner (TWX), Altria Group (MO), and Biogen Idec (BIIB), which have varying multiples and growth characteristics. For the one-year period through last month, Time Warner was up over 10%, Altria Group rose more than 25%, and Biogen gained over 80%.
Growth Fund’s diverse holdings stem from its multi-manager approach. Standard & Poor’s Pane notes that the fund’s six managers are free to pursue their individual styles in their respective portfolio segments. “Historically, the fund has two value managers, two traditional growth managers, and two GARP managers,” Pane says. A conservative growth style has resulted from this multi-manager structure, she notes. The fund’s six managers have investment experience ranging from 18 years to 39 years.
The managers operate autonomously, but have access to “one of the strongest analytical teams in the country,” added Pane. Last year, American Funds spent $130 million on research and employed over 120 investment professionals.
Along with Growth Fund’s six managers, the fund’s analysts add their own stock picks to a portion of the portfolio. American Funds follows this practice with many of its funds, and the analysts’ portion of a fund can be as high as 20% of total assets.
Although several managers oversee Growth Fund, the portfolio’s turnover is a modest 25%. Volatility is also moderate. The portfolio has a three-year standard deviation of 18.4%, versus 18.1% for its peers.
Contact Robert F. Keane with comments or questions at: