Capital Group and Toews: The Behavioral Portfolio
The article highlights how Capital Group, a major asset manager known for its long-term, actively managed, diversified American Funds, and Toews Corporation, an emerging manager specializing in behavioral finance-driven tactical portfolios, both leverage behavioral finance principles to help investors stay invested through market volatility and design financial products aligned with investor behavior.
Since the 1980s, the study of behavioral finance has helped us to identify why individuals make the investment decisions they do and how these decisions collectively impact the markets. Advisors want their clients to succeed over the long-term, and helping them stay invested in volatile markets is a key goal. However, what is often overlooked is the impact behavioral finance has on financial product design too.
This month, two strategists available on Communities, Orion’s robust model marketplace, are highlighted for addressing both sides of the behavioral finance coin. Capital Group, the parent company of American Funds, provides investors with confidence in uncertain markets, while Toews Corporation designs portfolios rooted in behavioral finance theory.
Introducing “The Behavioral Portfolio”
Capital Group/American Funds: The Legendary Manager Focused on Long-Term Outcomes
- Capital Group is one of the largest asset managers globally, with close to $2.0T in assets.
- Founded during the Great Depression, Capital Group has a strong track record and reputation for retaining clients as a premier institutional active manager.
- Their models are broadly diversified and focus on client investment objectives ranging from growth to income, utilizing proprietary, low-cost, actively managed American Funds mutual funds.
- The underlying funds use Capital Group’s unique investment philosophy, including a multi-manager structure and high-conviction investments grounded in fundamental research. Their asset allocation is stable and consistent, focusing on long-term diversification.
- As core holdings in a portfolio, Capital Group provides two benefits: the ability to take advantage of market movements and the potential for alpha generation through actively managed investments.
Toews Corporation: The Behavioral Portfolio Design
- Toews is an emerging manager founded in the mid-1990s, focusing on tactical investing, income, and behavioral finance.
- Their investment philosophy is Behavioral Portfolio Design, building portfolios that seek to reduce risk by attempting to avoid periods of extreme losses (by tactically exiting markets quickly) while still participating in market gains.
- This approach can help risk-averse clients feel more comfortable during drawdowns and help risk-seeking investors take advantage of the upside, supporting the importance of staying invested for the long-term.
- Toews models are more tactical in their active management approach and have popular strategies with a strong focus on yield and income generation.
- Their strategies pair well with a broad-based, static core, adding tactical asset allocation and diversified income focus.
Explore over 20 Capital Group/American Funds models and 15 Toews models available in Communities.