Apart from the top two performers among the American Funds' mutual funds in the second quarter of 2015, the other funds had lackluster performance. Nonetheless, on comparison with broader markets, American Funds had decent performance. Though American Funds lagged Fidelity's best gain of 11.6%, it outpaced another behemoth Vanguard's best gain of 3.8%. It should be noted that Fidelity practices more active management compared to Vanguard's passive management.
If we look at broader markets, we notice the dismal trend. Markets had a dismal run in the second quarter; wherein the S&P 500 and Dow declined 0.2% and 0.9%, the NASDAQ did gain 1.8%. In the first half of 2015, fund inflow slumped 36% year over year to $143 billion. This significant decline was largely due to the dismal trend in the second quarter; wherein inflows were down to $41 billion through Jun 17, comparing unfavorably with the $102 billion of inflows in the first quarter.
Only four of the mutual fund categories could post above 10% gain in the first half. This is less than half of the 81% gains scored by mutual funds in the first quarter. These losses however owed a lot to the selloff on the eve of the quarter's end.
Coming back to American Funds' mutual funds, of the 626 funds under study, 232 funds finished in the green while 2 funds broke even. The average gain for these 232 funds was 1.41%. This compares favorably to the average loss of -0.84% for the 392 funds that finished in negative territory. (Note: This number includes same funds of different classes)
American Funds' mutual funds did manage to outperform its first quarter performance. This is unlike what has happened with key rivals; wherein their second quarter performance has dropped from first quarter. In the first quarter of 2015, this fund family which is among the largest mutual fund families in the US based on assets under management, could clock a maximum gain of just 6% in Q1. Foreign/Global and Growth categories were the top gainers for American Funds in the first quarter and they remain so in second quarter as well.
Second Quarter 2015 Review
American Funds noted: "Global stocks produced mixed returns as signs of improving economic growth were offset by fears of rising interest rates and a worsening debt crisis in Greece. Telecommunications stocks proved to be a bright spot, driven higher by M&A activity, while the rate-sensitive utilities sector fell the most. Emerging markets stocks advanced, supported by monetary easing in China. Bonds declined and the dollar slipped 4% against the euro."
For North America markets, American Funds said that optimism about the growing economy and the Fed's comments about gradual rate hike were tempered by Greek debt negotiations concerns. Slowdown in earnings growth also dampened stocks.
Meanwhile, potential mergers-and-acquisitions and the Supreme Court's ruling that upheld subsidies under the Affordable Care Act helped healthcare post the strongest gains in the S&P 500. The consumer discretionary and telecommunication services sectors' gains were also aided by mergers and acquisition activities. Possibilities of higher rates also boosted financial services companies. However, rate hike concerns affected dividend-paying stocks, largely the real estate investment trusts and utilities.
Top 15 American Funds Mutual Funds in Q2
Below we present the top 15 American Funds mutual fund performers of Q2 2015:
Note: The list excludes the same funds with different classes, and institutional funds have been excluded. Funds having minimum initial investment above $5000 have been excluded. Q2 % Rank vs Objective* equals the percentage the fund falls among its peers. Here, 1 being the best and 99 being the worst.
The top performers for American Funds mutual funds largely belonged to categories such as Global/Foreign and Growth. Asset Allocation too had a decent number of funds listed among the best 15 performers. Morningstar data showed that the foreign category of mutual funds have dominated the gains in the second quarter and the first half of 2015 as well. It was thus justified to have 6 funds from the Global and Foreign category.
The top two gainers are from Global category. American Funds SMALLCAP World A (MUTF:SMCWX) and American Funds New Economy A (MUTF:ANEFX) have gained 6.1% and 4.7%, respectively. Both these funds carry a Zacks Mutual Fund Rank #1 (Strong Buy). In fact, the other two funds with Strong Buy rank are also from Foreign and Global categories. These are American Funds EuroPacific Gr A (MUTF:AEPGX) and American Funds New Perspective A (MUTF:ANWPX). Meanwhile, American Funds Global Growth A (MUTF:PGGAX), also from Global category, carries a Zacks Mutual Fund Rank #2 (Buy). The only fund from this category to carry a dismal rank is American Funds Intl Gr & Inc A (MUTF:IGAAX) as it holds a Zacks Mutual Fund Rank #5 (Strong Sell).
American Funds Growth Port A (MUTF:GWPAX) and American Funds Gr Fnd of Amer A (MUTF:AGTHX) from Growrth category and American Funds Fundamentl Invs A (MUTF:ANCFX) from Growth/Income category also made it to the list. However, ANCFX carries a Strong Sell rank and AGTHX holds a Zacks Mutual Fund Rank #4 (Sell). GWPAX has a Zacks Mutual Fund Rank #3 (Hold).