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Fund Times

What Sudden Manager Departure Means for American Funds

Mark Denning's departure is a loss, and we're putting American Funds New Economy under review.

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American Funds veteran Mark Denning unexpectedly left parent company Capital Group on Sept. 9, 2019. Although Denning joined Capital Group 37 years ago, his departure wasn't a retirement but a personnel decision, according to a spokesperson. The circumstances surrounding this development remain uncertain, but it is a loss.

More than one colleague has singled out Denning as uniquely talented. At the time of his departure, he managed money in four American Funds strategies, all of which have Morningstar Analyst Ratings of Gold. He was the principal investment officer of American Funds Capital World Growth and Income (CWGIX) and one of eight named managers on that strategy. Denning was also one of nine named managers on American Funds EuroPacific Growth (AEPGX), one of 10 managers on American Funds New World (NEWFX), and one of four managers on American Funds New Economy (ANEFX).

Denning managed roughly $27 billion across all four funds in total. While that would be a huge sum for most asset managers to redeploy, Capital Group's multimanager system is suited to the task. Fellow portfolio managers can accommodate stock picks they share with Denning, while his unique positions can be overseen by each fund's PIO, which in the case of American Funds Capital World Growth and Income is firm veteran Michael Cohen, who is stepping into an interim role.

There's precedent for Capital Group navigating unexpected manager changes well. After James Rothenberg's untimely July 2015 death, the firm quickly and effectively reassigned his roughly $5 billion in assets while keeping portfolio turnover to a minimum. Capital Group should be able to do the same with Denning's assets in Capital World Growth and Income, EuroPacific Growth, and New World, given the size of those teams and the relatively modest amount of strategy assets Denning managed in each. Those three funds retain their Gold ratings.

With New Economy's aggressive strategy, matters are more complicated. Denning ran around 15% of its assets, had a specific role oriented toward non-U.S. stocks, and was one of only four named managers. Thus, its Analyst Rating is Under Review.

Alec Lucas does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.