HEAD-TO-HEAD: Capital Group versus T Rowe Price

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CONCLUSION

Morningstar has awarded the Capital Group fund four stars based on historical returns, but with a Bronze analyst rating. The firm also gives the T Rowe Price fund four stars, but a forward-looking analyst rating of only Neutral because of the relatively high fees for the retail share class.

FE Fundinfo, which bases its assessment on a fund’s three-year history of delivering alpha, minimising relative volatility and producing consistent returns, awards the Capital Group fund four crowns, and rates the T Rowe Price product lower with just three crowns.

“The Capital Group strategy’s diverse investment framework plays to its strengths. The managers position the portfolio to benefit from the growth in emerging markets but don’t narrow the universe to firms located there,” said Caquineau.

“This provides a great for the strategy’s investors to ‘divide and conquer’ under Capital Group’s hallmark multimanager approach, whereby its 12 skilled managers ply their preferred investment styles in their own slices of the portfolio,” he said.

However, the presence of multinationals can also hold the strategy back when emerging markets surge, Caquineau warned.

At T Rowe Price, the “investment acumen of experienced skipper Gonzalo Pangaro will be missed, but investors have reasons to stay put,” he said.

The strategy will be transitioned to a “promising duo” supported by the firm’s huge research capabilities in emerging markets, he noted.

Another comforting point is that one of the successors, Eric Moffett, has an approach that aligns well with Pangaro’s.

“Hence, it is fair to expect continuity in terms of investment strategy,” said Caquineau.

The strategy’s large asset base makes it less nimble than most peers, but the focus has always been on liquid large-cap stocks, and the strategy has been soft-closed since 2018, which alleviates potential capacity concerns.

In conclusion, “the Capital Group strategy has a strong record over long time periods, with a proven team and it deserves consideration in most portfolios,” said Caquineau.

“We have a slightly higher conviction about the fund than the T Rowe Price product, where there will be some uncertainties about the succession,” he said.

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