American Funds Target Retirement Delivers, on Its Own Terms
American Funds has blazed its own trail to chart-topping results. But can it change course if the tide shifts?
American Funds’ target-date series is proving investors still have an appetite for actively managed strategies, and it’s doing it the old-fashioned way: with below-average fees and long-term performance that leaves most peers far behind. But as some of the favorable market conditions that boosted its results start to reverse, can it keep up?
American Funds has been the only target-date provider of its kind in the top five target-date flow-getters in the past four years, an all-active manager bucking the trend of low-cost index-based series storming the charts. 2020 was another blockbuster year for the series, raking in $13.5 billion in inflows while the overall target-date market was in net outflows. For the last decade there’s been a seismic shift in money flowing away from actively managed funds and toward cheap passive alternatives. Target-date funds have been no exception to that trend and in 2020, despite flows turning negative for the first time, share classes in the cheapest quintile continued to see positive inflows, as shown in Exhibit 1.