The mandate, originally conceived over 30 years ago for a foundation, is focused on dividends and lower volatility
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Capital Group has launched a new mandate for Canadian investors who seek growing income and lower volatility. The Capital Group Capital Income Builder (Canada), a globally diversified equity-income portfolio strategy that invests primarily in a broad range of income-producing securities, including common stocks and bonds.
“Capital Income Builder's mandate grows more relevant with each passing year," said portfolio manager Joyce Gordon. “We're living longer, costs continue to rise and our years in retirement could match our working years.”
According to Jim Lovelace, principal investment officer and one of the mandate’s portfolio managers, the strategy is differentiated from others by its focus on dividends and dividend growth, particularly as income becomes more valuable for long-term investors. “[W]e really do start the investment process with the dividend,” he said.
Using a stringent eligibility process, the Capital Income Builder strategy evaluates dividend-paying companies and pursues two primary investment objectives:
- To provide a level of current income (measured in US dollars) surpassing the average yield on US stocks generally
- To deliver a growing stream of income over the years as measured in US dollars
Instead of following quantitative screens, the management team does on-the-ground research to look for quality companies in North America and beyond with strong management, a good business model, and an ability to grow earnings and dividends. That effort is supported by Capital Group’s global research network, which has provided bottom-up intelligence since 1962.
The strategy was initially conceived over 30 years ago in the US to meet the needs of a foundation. “Since that time, Capital Income Builder has provided investors with an endowment-like experience: a steady stream of growing income, plus downside protection," said Mark Tiffin, president of Capital International Asset Management (Canada).
Aside from targeting rising dividend income, the strategy follows a secondary objective of providing capital growth. Its focus on quality companies is also ideal to provide a cushion in down markets, which investors are likely thinking about more as October’s volatility, along with other trends, points to an increasingly negative outlook.
Twelve portfolio managers with a median 28 years of investment experience run the fund. Following Capital Group’s proprietary approach, the Capital System, each manager invests a portfolio of the assets independently, with another sleeve managed by a group of investment analysts.
“In many ways, Capital Income Builder is a real workhorse, grinding away slowly,” Lovelace said. “Its charm may not be overwhelmingly evident in the near term, but over longer periods, its quiet dependability may be one of its greatest achievements.”
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