For a top mutual fund company. Capital Research and Management Co. is as secretive as a spy.
The Los Angeles-based concern has "no name recognition in the marketplace," says Geoff Bobroff, a senior vice president at Lipper Analytical Services Inc.,Denver. "But its one of the highest-quality shops out there."
Indeed, he says, Capital Research "is the best-kept secret in the business."
Despite the aura of mystery surrounding the company, industry insiders rave about the company's product-the American Funds. They are top performers and according to a recent study by Alliance Capital Management, they are among the best sellers at banks.
So why is the company so quiet about itself?
"We do keep a very low profile," said Lisa Swaiman, a spokeswoman for Capital Research,which manages over $60 billion of assets. "We are a privately held company, and we feel that its in the best interest of our shareholders to spend our time managing their money, not talking to the media."
A computer search of the major U.S. newspapers and financial press turned up fewer than 30 stories mentioning Capital Research or the American Funds since January 1992.
53 Years a Star
But the luck of public exposure certainly hasn't hurt the American Funds'sales and performance.
This year, Investment Company of America, a fund sold by brokers and managed by the company, was rated the top-performing fund of all time by CDA/Wiesenberger, a firm that tracks mutual fund performance. Since 1940, the fund has returned 12.4% a year.
The rest of the fund family aren't exactly sluggards. Last year. U.S. News and World Report ranked American Funds as the nation's best fund family for 1992.
Performance this year has been stellar too, according to Morningstar Inc. As of September 15,22 of the 23 American Funds listed in the New York Times tables has one-year total returns of upward of 10% The top performer, the New Economy fund, posted a 35.2% return.
Bankers have also bestowed praise on the company. According to a survey released this month by Alliance Capital Management, American Funds were the third best selling funds through banks, up from fourth last year. The New York-based fund firm's study also found that American Funds ranked fourth among funds made available by banks.
Capital Research has "consistently been one of our top mutual fund companies," said Russ Fisher, vice president and sales manager of Comerica Investment Services, a subsidiary of Detroit-based Comerica Inc.
From the 62 banks surveyed by Alliance, Capital Research received special praise for its commission structure and sales literature.
"I have a couple of brokers that sell a lot of' American Funds, said Kim Hawdinson, assistant vice president at Mid America and Invest manager. "They have good, consistent returns and good marketing pieces," she said.
Banks also awarded the company the top-rating-"excellent" -- for product diversity, according to the study.
As assets pour into mutual funds industrywide, American Funds are ballooning. The Balance Fund, which broke the $1 billion mark by December, had $948 million just three months earlier.
In a current Morningstar ranking of the top 10 growth funds, the American New Economy comes in eight. The fund is up over 20% since Jan. 1 and has returned 35.2% in the past year.
While analysts ring Capital Research's praises and bankers call it a force to be reckoned with, marketers marvel over its ability to build sales so quietly.
Service and Support
Then how has the company gained and maintained its piece of the mutual fund sales pie?
"We don't have much of an advertising budget to speak of," Ms. Swaiman of Capital Research said.
However the fund industry as a whole doesn't do a lot of advertising, Lipper's Mr. Bobroff said. "Success is not really related to tombstone ads," he said. "They have demonstrated a consistent management style. They don't try to be all things to all people."
Capital Research's best attribute is its level of service and support, Mr. Bobroff said.
"The thing that jump-started them on the sell is their service fees,"Mr. Bobroff said. The company was one of the first to pay 12b-1 service fees to be brokers, he said.
While some bankers say the funds are selling well, Mr. Bobroff said that sales through banks could be better. "We haven't seen a significant increase in sales in the last year," said Comerica's Mr. Fisher.
Sales have generally been spurred by brokers who have moved from other environments into banks and know the funds from their previous posts, Mr. Bobroff added.
The funds are mostly sold through third-party distributors, although in the past three years, the company has developed regional service centers.
Centers have been set up in San Antonio, Tex.; Hampton Roads, Va.; and Brea, Calif. A fourth center is slated to open in the Midwest within a year.
Significant sellers among the wirehouses include Merrill Lynch, Smith Barney Shearson. Edward E. Jones, and A.G. Edwards, according to Lipper's Mr. Bobroff.
Hard to Find
The company certainly does not seem to be focusing on banks. When a company telemarketer was asked where a potential investor could buy American Funds at a bank, the representative said: "They're sold through quite a few banks, but I don't know which ones."
Capital Research has sales agreements with "more than a dozen banks." said Randy Cepuch, a company spokesman, "but we don't want to give more details that that." Mr. Cepuch also did not know how potential customers could find out where to buy the funds through banks or which banks sold them.
Independent research revealed a number of banks that sell American Funds. Among the bigger banks that make the funds available are Comerica, Columbus-based Banc One, and Fleet Brokerage securities, an affiliate of Fleet Financial Group, Providence, R.I. Smaller banks such as Citizens Commercial and Saving Bank of Flint, Mich., and Mid America Federal Savings Bank of Clarendon Hills, Ill., also sell them.
However, Capital Research has no wholesaler force dedicated to the bank channel, nor anyone in charge of bank sales, Ms. Swaiman said.
"American Funds distributors feel very strongly that the broker is their client,"she explained. "And brokers have grown to appreciate that over the years."
Sellers love American Funds, Mr. Bobroff agreed. The company has "made an investment overtime in quality wholesalers, service and literature,"he said.
Despite all the theories about its success. Ms. Swaiman said "there is no magic formula.
The primary reason Capital Research's funds sell well is performance, said D. Mark Olson, chief executive officer at Invest Financial Corp. The Tampa-based fund marketer, which is a subsidiary of Kemper Financial Cos.,includes American Funds on its preferred products list.
"They are not doing anything special, Mr. Olson said. "They are just so darn good at managing money."
The company's commission structure is no different than anyone else's Mr. Olson explained. Its wholesalers and sales literature are good, but so are other companies',he added.
Capital Research has "a reputation for having great sales literature," said Thomas E. Ryan 3d, an industry consultant and former vice president at Pioneer Funds Distribution Inc. "But the industry has caught up." What sets it apart now, he said, is performance.
Capital Research has "the most consistent long-term performance, especially in equity funds, "Mr. Olson agreed. "And now we have a marketplace out there that is ready to buy equities."
Coming into Vogue
While many people are praising the company, others say its success is a matter of being in the right place at the right time. "Quite simply, their claim to fame is coming into vogue," Mr. Olson said.
The company doesn't need to promote its funds, because "American Funds is a household name among brokers, and customers' rely on their broker's suggestion," Mr. Olson said.
"The way we've been able to maintain our record is to stick to the business we know best," Ms. Swaiman said. And that, she added, is the business of managing funds, not promoting them. !!!BEGIN TABLE AT A GLANCE American FundsAssets under $60 billion
managementShareholders 4 million
Funds 26Location Los AngelesInvestment Capital Researchadviser and and Managementmanager Co.Principal American Fundsunderwriter Distribution Inc.Transfer American Fundsagent Service Co.Custodian Chase Manhattan BankEmployees 2,000
Sources: Alliance Capital Management, Lipper Analytical Services !!!END TABLE
