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Tuesday, May 25, 2010

An Internal American Funds Debate Over Size Comes to Light

News summary by MFWire's editors

Just how large is too large? Morningstar analyst John Coumarianos' research into famously tight-lipped American Funds shows that there had been dissension in the "counselor system" ranks, with some strategists fearing the company was getting too big.

Six year old documents from an American Funds excessive fee suit elucidated an employee survey which quoted portfolio counselors saying that growth needed to be curbed. Some quotes from the document included:

"Funds are getting so large that it becomes more difficult to execute mid-cap stock ideas," wrote portfolio counselor Barry Crosthwaite.

"Close all the funds. Don't just close the biggest or fastest growing. Doing that would simply shift the burden on to other funds," pleaded counselor Dale Harvey.

The survey was taken in 2004. The Morningstar piece offers a bit of analytical insight into American Funds and its parent Capital Research and Management, but perhaps more fun is the reminder of the sleeve system of management which allows American Funds to fluidly add managers and analysts as the size of its funds grow larger. 

Edited by: Daniel Tovrov

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