American Funds Capital World Bond Fund

About CWBFX

Investors with 401(k) accounts often see products from the American Funds family among their options.

One such vehicle is the American Funds Capital World Bond Fund. As the name suggests, the fund invests in fixed-income securities from countries around the globe. However, the U.S. is by far the largest single country represented.

As of July 17, 2017, the fund has assets totaling almost $11.95 billion invested in 1,057.00 different holdings. Its portfolio consists primarily of investment-grade bonds issued by corporations and governments. The fund may invest as much as 25 percent of assets in below-investment-grade bonds. At the end of 2015’s second quarter, about 7 percent of holdings were these higher-yielding bonds.

About three-quarters of the holdings have maturities of 10 years or less. Typically, shorter-term bonds have a lower return, but are also less volatile. The fund’s relatively small allocation in high-yield bonds may offset any drawbacks from the short-term, investment-grade bonds.

In addition, the fund has a tilt toward the lower end of the investment-grade universe. That’s another way to potentially boost returns while still mitigating risk.

In their commentary for the six months ended March 31, 2015, managers said “active management of currency exposures helped the fund to outpace the broader market.” In this case, that broader market is the fund’s benchmark, the Barclays Global Aggregate Index. Managers had lower exposure to the euro, relative to the benchmark index.

Managers also cited U.S. corporate bonds as strong contributors.

The fund has returned -0.25 percent over the past year and -0.31 percent over the past three years.

The fund proved its value in 2008, with a decline of less than 1 percent, while global equity markets went into a free fall. However, in years when global equity markets have been strong, this fund has lagged.

Investors who want to be diversified, in terms of asset classes and regions, may appreciate the benefits of holding global stock and bond funds, even during times of underperformance. As this fund’s track record illustrates, one asset class often picks up the slack when another is in a slump.

In addition to the potentially riskier high-yield bonds, the fund also invests in emerging markets. Currency risk is another factor managers must balance. Morningstar notes the measured approach, saying, “As of late, the portfolio's emerging markets, credit, and currency positioning were less extreme than some of its more intrepid world bond rivals.”

The fund launched in 1987. Over the past 15 years, its performance, net of expenses, has essentially matched the average of its Morningstar category, World Bond. Morningstar considers the fund’s expense ratio low, relative to the category.

The fund has returned 1.09 percent over the past five years and 3.47 percent over the past decade.

Rankings

U.S. News evaluated 327 World Bond Funds. Our list highlights the top-rated funds for long-term investors based on the ratings of leading fund industry researchers.

CWBFX is listed as:

#39 in World Bond

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Source: http://docphy.com/business-industry/business/american-funds-capital-world-bond-fund.html