Jason Kephart of Investment News
writes that the American
Funds Growth Fund of America
tracks its benchmark now more "closely
than ever before," so much so that it might be better the
American Funds Index Fund of America.
Kephart notes that the fund, according to Morningstar, Inc.
, has the "dubious distinction" of having a three-year R-squared of 98 to the Russell 1000 Growth Index,
up from 77 five years ago. The R-squared measures the strength of a
statistical relationship. The higher the number, the closer the
relationship between two variables.
Hence, generally speaking, a fund that is highly correlated to its benchmark index
if its R-squared reaches 90.
At 95, it is considered a ”closet” index fund.
president of Clark Capital Management
said he does not think that the Capital Group
managers have a choice. He said: "You could
certainly take the position that they're closet indexers, but it's
the underlying condition of the market that's causing it."
To read more about Kephart's analysis of the fund, go to the Investment Newswebsite
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