Market Analysis

Capital Group Revamps Strategy to Achieve $4 Trillion Goal by 2031

Amos Simanungkalit · 12 Jun 20243.2K Views

Capital Group aims to expand its fixed income business, accelerate international growth, and diversify beyond its core equities segment to counter client withdrawals and compete more effectively with faster-growing fund rivals, CEO Mike Gitlin told Reuters.

With a 93-year history, Los Angeles-based Capital has become the world's largest active fund firm, managing assets totaling $2.6 trillion, including the renowned 'American Funds' range. While traditionally private about its investment strategies, Capital now plans to increase assets to approximately $4 trillion over the next seven years, aiming for sustained growth amid challenges in the fund industry.

Gitlin outlined these priorities to 9,000 staff at Capital's new hub in west London, highlighting the shift in focus prompted by the rise of passive and private investing. Despite significant holdings in companies like Microsoft, Meta Platforms, and General Electric, Capital has faced net outflows from U.S. equity funds in recent years, contrasting with inflows reported by competitors such as JP Morgan and BlackRock.

Gitlin's strategy emphasizes expanding beyond the U.S., targeting growth in Europe and Asia while establishing a presence in Miami to serve Latin American clients. The firm, known for its multi-portfolio manager approach termed 'The Capital System,' aims to leverage its reputation for long-term investing while adapting to market changes, including recent ventures into private markets and sustainability funds.

Fixed income investments are central to Capital's revamped strategy, expected to benefit from potential central bank rate cuts. The firm anticipates a shift in its asset mix towards a 70:30 split between equities and bonds by 2031, alongside a significant increase in overseas client assets.

Acknowledging evolving client preferences, Capital plans to enter new markets through partnerships, including ventures into passive and private funds. Despite perceptions of a deliberate approach, Capital remains committed to long-term growth and strategic adaptation in a competitive market landscape.