American Funds Target Date Retirement Series
This is a stalwart target-date series.
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American Funds Target Date Retirement series features a star-studded cast of underlying funds, and Capital Group's commitment to boosting its asset-allocation resources gives us confidence the series can continue to deliver for shareholders over the long term. It continues to earn a Morningstar Analyst Rating of Silver for its cheapest share classes and Bronze or Neutral ratings for its more expensive options.
The series' underlying funds are arguably the most impressive among target-date strategies. About 85% of assets are in underlying funds that are rated Gold or Silver. Although the Gold-rated funds are mostly equity funds, the fixed-income funds do an excellent job protecting against equity market drawdowns and serve their role in this series well. In the first quarter of 2020, for example, American Funds Bond Fund of America gained 3.44%, edging past its benchmark Bloomberg Barclays U.S. Aggregate Bond Index during a period when shareholders could use all the protection they could get. Many fixed-income funds try to outperform their benchmarks by overweighting credit, which leads to worse performance during equity market stress, but thankfully that is not the case here.
The bond funds' resilience is particularly important because the glide path typically holds more equities than most peers, though the series also benefits from large cash stakes and a bias toward high-quality firms during downturns. Over the long term, this has contributed to the series' stellar results. The average 10-year category rank of its R6 share classes was third as of Dec. 31, 2020, the highest of any target-date series.
In January 2020, Capital Group revamped the team providing oversight of the series, and Michelle Black, formerly of the firm's private wealth group, was named as chair. Four additional hires were made to further round out the team, and fixed-income portfolio manager Shannon Ward was added to the committee. The added allocation resources have led to more-robust modeling and top-down analysis. Although it hasn't led to any significant changes, it's a strong foundation for future research efforts.
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