American Funds’ Growth Fund of America has become the first mutual fund to ever top $200 billion, The Wall Street Journal reports, but now that it’s reached that gargantuan size and its performance has become average, some shareholders are pressuring it to close to new investors. Certainly, this month, Morningstar took away one of its stars, ranking it now as four-star.
Nonetheless, executives at American Funds say that the fund can remain open because it’s managed by a team of analysts and 10 portfolio managers, each of whom manages a separate basket of cash. This, they say, fosters creative thinking.
They also note that rather than net flows, most of the fund’s appreciation has been due to market growth. They also say that research shows that funds tend to underperform after they are closed.