cr-342884 capital ideas live overall presentation 16x9 ... · 1 macro perspectives | 19...

Capital Group

Volatility is back: late cycle markets – where next?

FOR PROFESSIONAL INVESTORS ONLYThis material is a marketing communication

18 June 2019

CapitalIdeasLive

Capital Group

Chris Miles –Managing Director, Financial Intermediaries UK

Introduction

Capital Group

Hamish Forsyth –President, Europe & Asia

Welcome

Capital Group

As at 31 March 2019. The Capital Group companies manage equities through three investment divisions that make investment and proxy voting decisions independently. Fixed-income investment professionals provide fixed-income research and investment management across the Capital organisation; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups. 1. Source: Strategic Insight’s (SI) SimFund Global Pro database. SI is an Asset International company.

Relationships based on five key pillars

Stability

85+ years

of investing since 1931

7,200+

employees worldwide

Single focus

Investment management is all that we do

$1.9tn AUM

The world’s largest manager of

active mutual funds1

Experience Independence Alignment Global

Investing alongside clients

Employee-owned

Capital Group

China: secular engine of globalgrowth at the end of a cycle?

Susan Dietz-Henderson –China Affairs Director

Steven Watson –Portfolio Manager

Lycus Ji –China Industry Specialist

MODERATED BY:Richard Carlyle –Investment Director

Capital Group

The power ofshareholderengagement

Natasha Braginsky Mounier –Global ESG Investment Director

Matthew Lanstone –Investment Analyst

Holger Siebrecht –Investment Analyst

Capital Group

Fund Selector:Next Generation

Marine d’Hortoy –Bedrock Asset Management (UK) Ltd

Pablo Valdes –Orienta Capital

Andrew Birt –Saunderson House

MODERATED BY:Mario González-Pérez –Capital Group

Capital Group

Andrew BirtSaunderson HouseAndrew is the Investment Director at Saunderson House and manages the team of in-house investment analysts. Having joined the firm in 2002, he spent five years in financial planning roles, prior to moving in January 2008 to the Investment Research team, where he has held lead analyst roles within UK and European equities, fixed interest and commercial property. Andrew was appointed Head of Research in 2015. A strong advocate of Saunderson House’s value investing philosophy, Andrew has played an integral role in developing the Saunderson House Investment Process. He has been a member of the Saunderson House Investment Committee since 2005, where he presents investment recommendations and helps to agree asset allocation and fund selection decisions. Andrew is a member of the Chartered Financial Analyst (CFA) Institute and has been a CFA charterholdersince 2010

Meeting participants

Marine d’HortoyBedrock Asset Management (UK) LtdMarine joined Bedrock in 2012 and co-directs the Investment Office. In this capacity, Marine oversees related activities, from the asset allocation process to manager selection and monitoring. Prior to this, Marine worked at Tradition Financial Services in London and BNP Paribas CIB in Paris. Marine graduated from Paris Dauphine University with a Master in Mathematics and Computer Sciences in 2009 and from ESSEC Business School with a specialized degree in Financial Techniques in 2011.

Pablo ValdesOrienta CapitalPablo Valdes graduated in Business Administration and earned a Master degree in Finance, specializing in stock markets and investment management. Pablo holds the certification as European Financial Advisor (EFA) and the brokerage licenses for the Spanish Stock Exchange: SIBE (spot markets) and MEFF (derivative markets). Pablo is also member of the European Financial Planning Association in Spain. Pablo previously worked for BBVA in the department of Equity Holdings (the firm’s private equity department). Pablo is a partner in OrientaCapital SGIIC.SA., a member of the Investment Committee and director of the fund selection team.

Capital Group

Break

Capital Group

Fixed income inlate cycle markets –delivering a predictable outcome

Mike Gitlin –Partner Capital Fixed Income Investors, Chair of the Fixed Income Management Committee and also a member of Capital Group Management Committee

Fixed income in late cycle markets: delivering a predictable outcome

18 June 2019FOR PROFESSIONAL INVESTORS ONLYThis material is a financial promotion

CapitalIdeasLive

Fixed income at Capital Group

Capital GroupFounded in 1931

Privately held

$1.9 trillion in assets under management*

*Assets under management shown is as of 31 March 2019. All values in USD. Source: Capital GroupThe Capital Group companies manage equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management acrossthe Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

12

13Fixed income at Capital Group |

Our global fixed income capabilitiesCapital Group fixed income assets by sector

Data as at 31 March 2019. Assets under management by Capital Fixed Income Investors. All values in USD. Totals may not reconcile due to rounding.1. Mainly comprises money markets and US municipals.

10research locations around the world

45+ yearsexperience in fixed income investing

$333BFixed income

$113BGovernments

$61BInvestment-grade corporate

$64BOther1

$48BUS mortgages

and asset-backed

$20BEmerging markets

debt

$28BHigh yield corporate


As a privately owned, independent organisation, we can base our decisions on a long-term perspective.

Achieving superior, long-term returns is our only goal, so managers are rewarded for their results, not the level of assets they manage.

With one of the highest retention rates in the industry1, we have some of the most experienced investment professionals.

Compensation basis

Emphasis increasing with each successive period

17 25

Fixed Income portfolio managers’ experience100% employee owned by a broad group of more than 400 investment professionals and business leaders, with no individual owning more than 2.5% Years with Capital Group and industry

Past results are not a guarantee of future results. As at 31 December 2018. Source: Capital Group1. As at 31 December 2016. Source: Morningstar, based on data from Capital Group’s American Funds, which are not available for sale outside of the United States. This statement refers to the overall portfolio manager retention rate across Capital Group. It is based on the

percentage of managers who have stayed with the firm during the past five calendar years.

Aligned with investor successA long-term perspective aligns our goals with the interests of our clients

1 3 5 8

Years


A process built on experience

Data as at 31 March 2019. Source: Capital GroupTrading includes traders, trading analysts and head of Global Fixed Income Trading.Investment services professionals includes investment specialists and Investment Product Management associates.Other fixed income professionals includes portfolio and derivatives strategists, research associates and business management.

An experienced team of dedicated fixed income professionals

Average years of experience

Total In the industry With Capital Group

Portfolio managers 31 25 17Research analysts 43 12 5Trading professionals 36 19 12Macro analysts 12 23 9Risk and quantitative analysts 10 12 5Investment services professionals 22 19 6Other fixed income professionals 20 16 8

Total fixed income professionals 174


Actions speak louder than wordsOur research advantage: Analysts managing assets helps create value

The Capital SystemSM empowers analysts to invest

Attract and retain Stability

• Analysts do not just recommend investments, they invest alongside portfolio managers via the Research Portfolio (RP)

• The RP is a strong signalling mechanism of analysts’ convictions

• Creates diversified, high-conviction portfolios

• Our commitment to analysts managing assets allows us to attract and retain excellent talent

• Helps us build experienced investment teams

• Analysts think like investors and manage different types of investment risk within their portfolio sleeve

• Helps us manage risk, which could lead to stable returns

Past results are not a guarantee of future results.


Trading experience

Data as at 31 March 2019. Source: Capital Group* Currently, Capital Group is invested in US municipal funds in the United States only. American Funds are not registered for sale outside of the United States.

Institutional strength in trade execution

Experienced team

• 36-person trading team

• Averaging 19 years of industry experience and 12 years with Capital Group

• Trading desks in London, Los Angeles, New York and Singapore

Partner in the investment process

• Participate in investment meetings

• Deep sector experience

• Relative value analysis

• Advice on sizing ideas in the portfolio

Primary and secondary liquidity

• Capital’s size, scale and reputation positionus well in the new issue market

• Sector specialists often find better secondary liquidity than generalist traders

Specialised trading responsibilitiesAverage years of experience

Total Industry Capital Group

Non-US and emerging markets debt 6 19 16

Corporates (high yield and investment grade) 8 20 12

Municipal* 4 25 14

Foreign exchange 4 26 18

Money market 2 27 21

Rates and structured 5 15 7

Fixed income trading management 1 26 2

Fixed income trading analysts 6 7 5

Macro & market perspectives

18

191 Macro perspectives |

De-synchronized global growthU.S. not expected to decouple

%

-0.5

0.0

0.5

1.0

1.5

2.0

2.5

Jan-16 Jan-17 Jan-18 Jan-19

U.S.

Japan

Eurozone

Slowing growth1 Muted inflation pressures2

For illustrative purposes only. 1. Projections begin in 2019, based on IMF data as of April 2019.2. Core personal consumption expenditure price index, trailing three-month average.Source: Bloomberg. As of 31 March 2019.

0.0

0.5

1.0

1.5

2.0

2.5

3.0

2016 2017 2018 2019 2020 2021

U.S.

Japan

Eurozone

% Projected


China matters

1. Credit data as of 31 January 2019. Gross domestic product (GDP) data as of 31 December 2018. 2. As at 31 March 2019.Sources: Capital Group, Bloomberg, Thomson Reuters

Growth is slowing alongside credit; tariffs have potential to destabilize further

Declining credit is leading growth lower1 Weaker trade in light of tariffs2

-30%

-10%

10%

30%

50%

70%

2006 2008 2010 2012 2014 2016 2018

Imports

Exports

Real GDP growth y/y

8%

12%

16%

20%

6.0%

6.4%

6.8%

7.2%

2015 2016 2017 2018 2019

Total credit growth y/y


U.S. is late cycle

1. Unemployment data as of 31 March 2019; job openings data as of 31 January 2019. 2. Employment Cost Index includes both earnings and non-cash benefits for employees. As of 31 December 2018. 3. Bloomberg. As of 1 May 2019. 4. As of 31 December 2018. Sources: Bureau of Labor Statistics, Federal Reserve, National Bureau of Economic Research, Thomson Reuters.


The Fed pivoted to the rescue

Asset prices have more than retraced 4th quarter weaknessInterest rate markets expect the Fed to cut rates next1

Past results are not a guarantee of future results. For illustrative purposes only. 1. Source: Bloomberg. As of 31 March 2019.2. Source: Bloomberg. Indices used: S&P 500; MSCI World ex US; Bloomberg Barclays Global Agg Corp (USD hedged); JPMorgan Global High Yield; JP Morgan EMBI Global Diversified. Total returns in USD terms.

7.2%

8.6%

5.3%

13.6%

18.2%

-1.3%

-3.9%

0.0%

-12.8%

-13.5%

9/30/18 — 12/31/18 12/31/18 — 4/30/19

0

1

2

3

2015 2016 2017 2018 2019 2020 2021

Fed funds target rate –midpoint of range

%

Projection based on market pricing

S&P 500

Global equities ex U.S.

Global Corporate Investment Grade

Global High Yield

$ EMD


Low volatility … rich valuations

Risk asset valuations are rich

U.S. interest rate volatility fell to an all-time low in March1

Market indices2 Cheap Current valuation compared to 15-year history3 RichS&P 500 price earnings ratio 10 19MSCI ACWI price earnings ratio 9 17U.S. investment-grade corporate spreads 618 76U.S. high-yield bond spreads 1,971 233Global credit spreads 570 86Real estate4 346 2,229

50

100

150

Mar-95 Mar-00 Mar-05 Mar-10 Mar-15

31 March 2019Past results are not a guarantee of future results. 1. Annual BP Implied Vol (3Y Option on 7Y Swap). Source: Credit Suisse LOCUS. As of 31 March 2019.2. Price-earning ratios are based on one-year forward earnings. Bloomberg Barclays U.S. Aggregate Corporate Index OAS, Bloomberg Barclays U.S. High Yield 2% Issuer Cap Index OAS, Bloomberg Barclays Global Aggregate Corporate Index OAS, MSCI U.S. REIT Index. 3. Scale represents the minimum/maximum value for the respective index from March 2004 to March 2019. 4. Real estate figure is based on the total return index levels of the MSCI U.S. REIT Index.Sources: Bloomberg Index Services, Ltd., IBES, MSCI, Standard & Poor’s, Thomson Reuters. As of 31 March 2019.


Declining government bond yields1 (%)

1.5

2.0

2.5

3.0

3.5

-0.2

0.0

0.2

0.4

0.6

0.8

Mar-18 Jun-18 Sep-18 Dec-18 Mar-19

10 Year JGB

10 Year UST (RHS)

10 Year bund

Negative yields persist in many developed markets

Falling global interest rates; rising stock of negative yieldsSlower growth, muted inflation, and easier monetary policies drove yields lower

Past results are not a guarantee of future results. As at 31 March 2019.1. Source: Bloomberg.

Spain

Germany

France

Portugal

Netherlands

Japan

3 7 10 152 5

Longest maturity with a negative yield (years)

Switzerland


Past results are not a guarantee of future results. Sources: Federal Reserve, Robert Shiller, Thomson Reuters Datastream. Data for 1871–1961 represents average monthly U.S. long-term government bond yields compiled by Robert Shiller. Data for 1962–2018 represents 10-year Treasury yields, as of 31 December each year within the period. Data for 2019 is as of 31 March.

Lower rates for longer … stillIn a low-growth, low-inflation world, rates could stay lower for longer

0%

2%

4%

6%

8%

10%

12%

14%

The Long Depression (1873–1879)

The Great Depression (1929–1939)

Global financial crisis (2007–2009)

31 years of low rates



20191870 1885 1900 1915 1930 1945 1960 1975 1990 2005

2.41%

U.S. long-term government bond yields


5

6

7

8

9

10

07 08 09 10 11 12 13 14 15 16 17 18 19

Local currency sovereign bond yield (%)

Debt to GDP (%)Emerging markets offer attractive real yields2Positive debt dynamics in many EMs1

Local yields are attractive3 FX valuations at historic cheap levels4

70

90

110

130

150

2003 2006 2009 2012 2015 2018

-2

0

2

4

6

Braz

il

Mex

ico

Indo

nesia

Thai

land

Sout

h Af

rica

Pola

nd

Colo

mbi

a

U.S.

Japa

n

Germ

any

Past results are not a guarantee of future results. 1. Source: IMF. As of March 2019.2. Source: Bloomberg. Yields as of 28 February 2019, for all countries except for Brazil and Colombia, which are as of 31 October 2018

and 31 December 2018, respectively. Data shown is 10-year yield less the country’s core inflation, with the exception of South Africa

where a nine-year yield was used.3. Source: JPMorgan GBI-EM Global Diversified Index. Source: Bloomberg4. Source: Bloomberg, JPMorgan. Shows weighted valuations of JPMorgan GBI-EM Global Diversified constituents relative to USD. Data

as at 31 March 2019.

10-year real yield (%)

Emerging markets fundamentals supported by valuations

0

100

200

300

Braz

il

Mex

ico

Indo

nesia

Thai

land

Sout

h Af

rica

Pola

nd

Colo

mbi

a

U.S.

Japa

n

Germ

any

Developed markets

Emerging markets

Rebased to 100 as at January 2003


Macro summary

Low Medium High

Asset prices

What should bond risk appetite be?

We’re late in the economic cycle and growth is diverging

Monetary policy has driven asset prices … and outside the U.S it’s both experimental and stretched

Valuations are not cheap

Interest rates likely to stay lower for longer

1 5 10

Cheap Fair value Rich

Past results are not a guarantee of future results. Based on Capital Group assumptions. The information provided is not intended to be comprehensive or to provide advice.

Myths and realities

28

292 Myths and realities |

Myth: In a low-rate environment, I should reach for yield

Past results are not a guarantee of future results. 1. Bloomberg Barclays US Corporate High Yield Bond Index. 2. Bloomberg Barclays US Corporate Total Return Index. 3. Excess returns relative to the Bloomberg Barclays US Treasury Total Return Index. Source: Bloomberg. Chart shows monthly spread data from March 1999 through March 2019. Returns are in USD terms. 20-year monthly spread history (240 data points) is divided into quartiles where 379 bps, 492 bps and 658 bps (HY corporates) and 108bps, 138bps and 175bps (IG corporates) represent the 25th, 50th and 75th percentile, respectively.

Reality: Tight credit spreads are vulnerable late in the cycle

Range of credit spreads since 1999 divided into quartiles (bps)

50

100

150

200

250

300

350

400

200

1000

Mar-99 Mar-03 Mar-07 Mar-11 Mar-15 Mar-19

• 1st quartile • 2nd quartile • 3rd quartile • 4th quartile

175

138108

bps

379

658

492

Investment-grade corporates2

two-year excess returns (annualized)3

-2.4%

1.0%2.0%

4.5%

-3.9%

1.3%

3.1%

10.3%

High-yield corporates1

two-year excess returns| (annualized)3

bps


Myth: Emerging market debt is a frontier asset class

Past results are not a guarantee of future results.Yields shown above reflect average yield to maturity. Correlations are to the S&P 500 Index.1. Statistics shown are based on the representative accounts for Capital Group Emerging Markets Bond Fund (LUX) and Capital Group US High Yield Bond Fund (LUX). 2. Ratings data shown represent a 50/50 blend of JPM EMBI Global Diversified Index and JPM GBI-EM Global Diversified Index. Bond ratings typically range from AAA/Aaa (highest) to D (lowest) and are allocated to each bond issue and summarised as the higher of

Standard & Poor’s, Moody’s and Fitch.Source: Morningstar. As of 31 March 2019.

Reality: Emerging market debt offers quality credit at attractive yield

0% 10% 20% 30% 40%

AAA

AA

A

BBB

BB

B

C

Not rated

Nearly two-thirds of EM bonds are investment grade2EM can provide more yield and better diversification compared to high-yield corporate bonds1

5

6

7

8

9

0 0.2 0.4 0.6 0.8

High-yield corporates

EM debt

5-year equity correlation

Yield (%)


Myth: Passive fixed income = Benchmark returns Reality: While passive has gained market share1, rolling excess returns are typically negative2

15%

20%

25%

30%

-1.5

-1.0

-0.5

0.0

0.5

1.0

3/31/2014 3/31/2015 3/31/2016 3/31/2017 3/31/2018 3/31/2019

3-ye

ar ro

lling

exc

ess r

etur

n

Mar-14 Mar-15 Mar-17 Mar-18 Mar-19Mar-16

0.0Investment-grade corporates

High-yield corporates

Pass

ive

% o

f tot

al fi

xed

inco

me

mar

ket

Past results are not a guarantee of future results.1. Passive share of total US fixed income market; US market taken as proxy for global market given data availability. 2. Average rolling excess returns of passive funds in Morningstar’s US Corporate Bond and US High Yield Bond categories over available rolling 3-year periods from 2011-2019, net of fees in USD terms.Source: Morningstar, as at 31 March 2019


Short Long

Based on valuations today, what duration bond funds should investors own?

Now is not the time to stretch for yield and sacrifice diversification and capital preservation

Active fixed income typically beats passive for multiple reasons

Emerging markets debt is an idiosyncratic market that offers attractive risk-reward

Low High

Based on valuations today, what level of credit risk should investors take?

Reality check

Past results are not a guarantee of future results. Based on Capital Group assumptions. The information provided is not intended to be comprehensive or to provide advice.

333 Actionable ideas |

Three actionable ideas

1Stay balanced

2Place a premium on

predictability

3Re-think your higher income

bucket


Morningstar EAA Global Bond category

Morningstar EAA EUR Diversified Bond category

Global Agg Global Intermediate Euro Agg

Global Bond Fund1 Global Intermediate Bond Fund1 Euro Bond Fund1

Approach Preservation of capital by investing globally in investment-

grade bonds

Provide moderate duration exposure by investing globally in

investment-grade bonds

An anchor for euro-based portfolios, with a focus on quality bonds

Sovereign allocation 75% 50% 70%

Yield (%) 2.5 2.2 1.0

Duration (years) 6.6 3.6 6.7

Action: stay balanced

Past results are not a guarantee of future results. Typical sovereign allocation represented by current government bond exposure. Sources: Capital Group, Morningstar. As of 31 March 2019. 1. Capital Group Global Bond Fund (LUX), Capital Group Global Intermediate Bond Fund (LUX), Capital Group Euro Bond Fund (LUX).

Balance your portfolio with core bond funds


Past results are not a guarantee of future results. Invested capital is at risk; the strategy aims to achieve a positive return over the long term although there is no guarantee this will be achieved over that or any time period. Data as at 31 December 2018. Data based on the representative Global Corporate Bond account, which has not been approved for sale outside of the United States. Sources: eVestment, Capital Group, Standard & Poor’sInception is 30 April 2012. Correlation calculated using monthly total returns. Returns used to calculate correlations for the representative account are gross of management fees and expenses. Index used for correlation purposes is MSCI World Index withnet dividends reinvested (Global stocks). Correlation is a mathematical concept used to describe how closely changes in the returns of different asset classes mirror each other. Universe breakdown is based on latest available data from eVestment.Bond ratings typically range from AAA/Aaa (highest) to D (lowest) and are allocated to each bond issue and summarised as the higher of Standard & Poor’s, Moody’s and Fitch

Capital Group GlobalCorporate Bond strategy

eVestment Global Corporate Fixed Income

universe

Investment Grade vs.High-Yield Compositions (%)

Rated BBB- or higher

100

88Correlations to global equities(Based on monthly returns, 30 April 2012 – 31 Dec 2018)

0.51

Rated below BBB-100 90

10

0.35

Action: place a premium on predictabilityA pure investment-grade portfolio has advantages


Action: re-think your higher income bucketCombining emerging markets debt and high yield has its advantages

Past results are not a guarantee of future results.1. Returns before fees and expenses. Fees and expenses will apply. The impact of fees on returns may vary depending on the investor and share class. Please visit capitalgroup.com for further details. Source: Capital Group2. JPMorgan Global High Yield Index. Fees apply to passive global high-yield bond products. Relevant exchange-traded funds (ETFs) and index funds have average TERs of 0.49 and 0.12 respectively. Source: JPMorgan3. JPMorgan EMBI Global Index. Fees apply to passive Global Emerging Market Bond products. Relevant ETFs and index funds have average TERs of 0.40 and 0.24 respectively. Source: JPMorgan4. JPMorgan GBI-EM Global Diversified Index. Fees apply to passive global emerging market local currency bond products. Relevant ETFs and index funds have average TERs of 0.53 and 0.29 respectively. Source: JPMorganThe inception of Capital Group Global High Income Opportunities (LUX) was 7 May 1999. Due to the availability of data for the emerging market local currency debt index (JPMorgan GBI-EM Global Diversified Total Return), we have shown all returns since its inception on 31 December 2002, to ensure consistency when comparing one asset class with another.

Capital Group Global High Income Opportunities (LUX) (CGGHIO): returns in US$ terms before fees and expenses as at 31 December 2018

2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 Annualised return (16 years)

27.5% 23.0% 13.8% 17.1% 18.1% -5.2% 58.9% 15.7% 8.5% 18.5% 7.4% 5.5% 1.2% 18.3% 15.2% -1.6% CGGHIO9.2%

26.5% 13.9% 10.7% 15.2% 8.5% -10.9% 39.9% 15.0% 5.7% 17.9% 1.9% 1.7% -4.3% 17.9% 11.1% -2.4% High yield corporate bonds8.4%

25.7% 11.7% 6.3% 11.4% 6.3% -17.0% 28.2% 13.9% 2.8% 16.8% -6.6% -0 .5% -6.7% 10.2% 9.3% -4.6%Emerging market debt

(USD) sovereign8.0%

16.9% 11.5% 3.1% 9.9% 2.9% -26.8% 22.0% 12.0% -1.8% 16.2% -9.0% -5.7% -14.9% 9.9% 8.3% -6.2%Emerging market debt

(local currency) sovereign 6.6%

High yieldcorporate bonds2

Emerging market debt(USD) sovereign3

Emerging market debt(local currency) sovereign4

CGGHIO¹

Funds above Morningstar peer median

3 years 5 years 7 years

Total return

Morningstar risk-adjusted return

Attractive long-term historical results vs. peersOur fixed income Luxembourg fund range

Past results are not a guarantee of future results. Invested capital is at risk; these funds aim to achieve a positive return over the long term although there is no guarantee this will be achieved over that or any time period. For illustrative purposes only. Data as at 30 April 2019. Figures based on results of Z share class as a representative share class. Peer group is defined as the Morningstar category for each fund. Total return statistic is the percentage of Capital Group strategies for which the average annual total return exceeded the peer group median. Morningstar risk-adjusted return is calculated by Morningstar. There were 9 Capital Group strategies in the three-year period, 9 in the five-year period and 7 in the seven-year period. Total returns in USD terms. Source: Morningstar

37

89% 89% 88%

89% 89% 88%

Striving to meet investor needs with focused fundsOur fixed income Luxembourg fund range

Stay balanced Capital Group Euro Bond Fund (LUX)

Capital Group Global Bond Fund (LUX)

Capital Group Global Intermediate Bond Fund (LUX)

Z EUR ISIN:

Z USD ISIN:

Z USD ISIN:

LU0817809279

LU0817825630

LU1494630897

Credit: place a premium on predictability

Capital Group Euro Corporate Bond Fund (LUX)

Capital Group Global Corporate Bond Fund (LUX)

Capital Group US Corporate Bond Fund (LUX)

Z EUR ISIN:

Z USD ISIN:

Z USD ISIN:

LU0817810103

LU1746179610

LU1567059693

Rethink higher income Capital Group Emerging Markets Debt Fund (LUX)

Capital Group Emerging Markets Local Currency Debt Fund (LUX)

Capital Group Global High Income Opportunities (LUX)

Capital Group US High Yield Fund (LUX)

Z USD ISIN:

Z USD ISIN:

Z USD ISIN:

Z USD ISIN:

LU0815114623

LU0815115356

LU0817816134

LU1671579123

As at 31 May 2019. Reflects our Luxembourg-domiciled UCITS fund range available in Europe and Asia. 38

Appendix

39

40Appendix |

Award-winning fixed income business

Morningstar Awards 2019 © Morningstar, Inc. All Rights Reserved

Best Fixed Income HouseGERMANY

Il Sole 24 OreBest Fixed Income International High Yield Fund. GHIO (Class B)

Best Fixed Income HouseHONG KONG

Best Fixed Income HouseSINGAPORE

Capital Group Global High Income Opportunities (LUX)Lipper: Bond Global High Yield Category, Best Fund Over 3 Years

2019 Austria, Europe, France, Hong Kong, Netherlands, Singapore, Switzerland, Taiwan & UK.Lipper Fund Awards from Refinitiv 2019. © Lipper. All Rights Reserved.

2019 WINNERAUSTRIA

2019 WINNERHONG KONG

2019 WINNERSWITZERLAND

2019 WINNEREUROPE

2019 WINNERNETHERLANDS

2019 WINNERTAIWAN

2019 WINNERFRANCE

2019 WINNERSINGAPORE

2019 WINNERUNITED KINGDOM

41Appendix |After management fees and expenses for the current Total Expense Ratio (TER) of the Z share class, as a representative share class, which has a maximum TER of 90bps. Fund results are based on close of market returns (T+1). Source: Capital Group

1. Lifetime: 7 May 1999 - 31 March 2019. Past results are not a guarantee of future results.

Year Fund1

1999 From 7 May 6.72000 0.52001 9.92002 3.52003 25.32004 12.82005 12.82006 16.12007 7.72008 -18.02009 38.62010 12.92011 1.92012 16.92013 1.02014 -1.42015 -7.52016 16.82017 10.12018 -2.52019 3 months 6.1

Capital Group Global High Income Opportunities (LUX)Investment results as at 31 March 2019 in US$ terms (after fees and expenses — Z share class)

Results summary, % Results summary, %

Year Fund 1

Annualised lifetime return 7.91 year 2.73 years p.a 8.35 years p.a 3.310 years p.a 8.2Total value US$ 711 million

Rolling 1 year results to 31 March, %

Year Fund 1

2015 -3.12016 -4.12017 16.52018 6.02019 2.7

Morningstar category: Global Flexible Bond. Class Z in USD as at 28 February 2019.

Source and copyright: Morningstar. For more information on the methodology of theMorningstar ratings please visit www.morningstar.com

Capital Group

Thematic workshop

Capital Group

Break

Capital Group

Thematic workshop

Capital Group

Lunch

Capital Group

Chris MilesWrap up

Capital Group

Equity BalancedGrowth Growth and income Balanced

GlobalCapital Group Global Equity Fund (LUX)Capital Group New Economy strategy¹Capital Group New Perspective Fund (LUX)

RegionalCapital Group AMCAP Fund (LUX)Capital Group Japan Equity Fund (LUX)

EmergingCapital Group Emerging Markets Growth Fund (LUX)Capital Group New World Fund (LUX)

GlobalCapital Group Global Growth and Income Fund (LUX)Capital Group World Dividend Growers (LUX)Capital Group World Growth and Income strategy1

RegionalCapital Group European Growth and Income Fund (LUX)Capital Group Investment Company of America (LUX)Capital Group Washington Mutual Investors strategy1

GlobalCapital Group Capital Income Builder (LUX)Capital Group Global Allocation Fund (LUX)Capital Group Global Absolute Income Grower (LUX)

RegionalCapital Group American Balanced strategy1

EmergingCapital Group Emerging Markets Total Opportunities (LUX)

All portfolios reflect our fundamental, research-driven investment approach and are focused on the long-term interests of our clients

BondsIncome Preservation and income

GlobalCapital Group Global High Income Opportunities (LUX)

RegionalCapital Group US High Yield Fund (LUX)

EmergingCapital Group Emerging Markets Debt Fund (LUX)Capital Group Emerging Markets Local Currency Debt Fund (LUX)

GlobalCapital Group Global Bond Fund (LUX)Capital Group Global Corporate Bond Fund (LUX)Capital Group Global Intermediate Bond Fund (LUX)

RegionalCapital Group Euro Bond Fund (LUX)Capital Group Euro Corporate Bond Fund (LUX)Capital Group US Corporate Bond Fund (LUX)

ITC.2641376_367

As at 1 May 2019. Reflects our Luxembourg-domiciled UCITS fund range, which is currently available in Europe and Asia, as well as a pipeline of Luxembourg funds based on existing US investment strategies, which are currently not available for sale outside of the United States. For illustrative purposes only. 1. Not currently available for sale outside of the United States. Reflects a pipeline of

Luxembourg funds that are under consideration in 2019/20. Does not indicate a guarantee that these funds will be launched.

Capital Group’s current and proposed investment offering in Asia and Europe

Capital Group

New initiative to introduce relevant, high-quality and long-standing investment strategies previously only available as US mutual funds. Includes the strategic development of our fixed-income offering

Globalising our investment offering

Past results are not a guarantee of future results. Data as at 31 March 2019 unless otherwise stated. Source: Capital Group1. Morningstar category: US Large-Cap Growth Equity. Morningstar Analyst Rating™ as at 19 July 2018.2. Morningstar category: Global Large-Cap Growth Equity. Morningstar Analyst Rating™ as at 10 October 2018.3. Morningstar category: Global Emerging Markets Equity. Morningstar Analyst Rating™ as at 6 February 2019.4. Morningstar category: US Large-Cap Blend Equity. Morningstar Analyst Rating™ as at 7 June 2019.

Building our business with the introduction of seasoned investment strategies

Strategy Type Vehicle Inception date AUM (US$)New PerspectiveCapital Group New Perspective Fund (LUX)

Equity, global growth StrategyLux fund

Mar 1973Oct 2015

92bn4,236m

ICACapital Group Investment Company of America (LUX)

Equity, regional growth and income StrategyLux fund

Dec 1933Jun 2016

130bn439m

New WorldCapital Group New World Fund (LUX)

Equity, emerging market growth StrategyLux fund

Jun 1999Oct 2016

42bn582m

US Corporate BondsCapital Group US Corporate Bond Fund (LUX)

Fixed income, preservation and income StrategyLux fund

Dec 2012Mar 2017

638m54m

AMCAPCapital Group AMCAP Fund (LUX)

Equity, regional growth StrategyLux fund

May 1967Jun 2017

66bn84m

US High YieldCapital Group US High Yield Fund (LUX)

Fixed income, return-seeking StrategyLux fund

Jul 2002Oct 2017

743m53m

Global Corporate BondsCapital Group Global Corporate Bond Fund (LUX)

Fixed income, preservation and income StrategyLux fund

Apr 2012Feb 2018

1,965m54m

Capital Income BuilderCapital Group Capital Income Builder Fund (LUX)

Multi-asset income StrategyLux fund

Jul 1987Sep 2018

104bn115m

Capital Group established a Luxembourg-domiciled UCITS fund range

1972

New Perspective2015, H2

ICA2016, H1

New World2016, H2

US Corporate Bonds and AMCAP

2017, H1US High Yield2017, H2

Global Corporate Bonds

2018, H1Launched as Luxembourg-domiciled UCITS funds

Capital Group New Perspective Fund (LUX)2

Capital Group Investment Company of America (LUX)

4

Capital Group New World Fund (LUX)

3

© 2019 Morningstar. All rights reserved. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. For more detailed information about Morningstar’s Analyst Rating, including its methodology, please go to: www.morningstar.com/content/dam/marketing/shared/research/methodology/778136_Morningstar_Analyst_Rating_for_Funds_Methodology.pdf. For disclosure and detailed information about this fund please refer to the full Morningstar Global Fund Report, as follows: Capital Group AMCAP Fund (LUX): twww.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/AMCAP_Mstar_Analyst_Report(en).pdf.Capital Group New Perspective Fund (LUX): www.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/NPF_Mstar_Analyst_Report(en).pdf.Capital Group New World Fund (LUX): www.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/NWF_Mstar_Analyst_Report(en).pdfCapital Group Investment Company of America (LUX): www.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/ICA_Mstar_Analyst_Report(en).pdf.

Capital Group

Capital Group AMCAP Fund (LUX)1

Capital Income Builder2018, H2

EU.07.CR-344979_0419

Capital Group

AMCAP: capturing growth in US equities

• Capital Group AMCAPFund (LUX) launched in June 2017

• Fund size of $91 million

© 2019 Morningstar. All rights reserved.Morningstar Rating™ as at 31 May 2019. Class Z in USD.Morningstar Analyst Rating™ as at 19 July 2018. Morningstar category: US Large-Cap Growth Equity

Capital Group Luxembourg funds with Morningstar Analyst Ratings

EU.07.CR-344979_0419

Past results are not a guarantee of future results. For illustrative purposes only. American Funds are not registered for sale outside of the United States. The information contained herein: (1) is proprietary to Morningstar and/or its content providers; (2) may not be copied or distributed; and (3) is not warranted to be accurate, complete or timely. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. For more detailed information about Morningstar’s Analyst Rating, including its methodology, please go to: www.morningstar.com/content/dam/marketing/shared/research/methodology/778136_Morningstar_Analyst_Rating_for_Funds_Methodology.pdf. For disclosure and detailed information about these funds please refer to full Morningstar Global Fund Reports at (NPF) www.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/NPF_Mstar_Analyst_Report(en).pdf, (NWF) https://www.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/NWF_Mstar_Analyst_Report(en).pdf, (ICA) www.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/ICA_Mstar_Analyst_Report(en).pdf, (AMCAP) www.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/AMCAP_Mstar_Analyst_Report(en).pdf & (GA) www.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/GA_Mstar_Analyst_Report(en).pdfAs at 30 April 2019, unless otherwise stated. Source: Capital Group

NPF: an unconstrained approach to global investing focusing on high quality multinational companies

• Capital Group New Perspective Fund (LUX) launched in October 2015

• Fund size of $4,554 million

© 2019 Morningstar. All rights reserved.Morningstar Rating TM as at 31 May 2019. Class Z in USD.Morningstar Analyst RatingTM as at 10 October 2018.Morningstar Global Large-Cap Growth Equity category.

• Capital Group New World Fund (LUX) launched in October 2016


NWF: capture the growth potential of developing economies

© 2019 Morningstar. All rights reserved.Morningstar Rating™ as at 31 May 2019. Class Z in USD.Morningstar Analyst RatingTM as at 6February 2019.Morningstar category: Global Emerging Markets Equity.

• Capital Group Investment Company of America (LUX) launched in June 2016


ICA: investment fundamentals that have proven successful for 84 years

© 2019 Morningstar. All rights reserved.Morningstar Rating™ as at 31 May 2019. Class Z in USD.Morningstar Analyst Rating™ as at 7 June 2019.Morningstar category: US Large-Cap Blend Equity.

GA: The right balance is all about simplicity

• Capital Group Global Allocation Fund (LUX) launched in January 2014


© 2019 Morningstar. All rights reserved.Morningstar Rating™ as at 31 May 2019. Class Z in USD.Morningstar Analyst Rating™ as at 5 June 2019. Morningstar category: USD Moderate Allocation

http://www.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/NPF_Mstar_Analyst_Report(en).pdf

https://www.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/NWF_Mstar_Analyst_Report(en).pdf

http://www.capitalgroup.com/content/dam/cgc/tenants/europe/documents/morningstar/ICA_Mstar_Analyst_Report(en).pdf

Capital Group

NEF: Seeking growth and innovation in an evolving world

WGI: A core global equity strategy for changing market environments

Bringing the best of Capital Group to Europe and Asia

• Capital Group World Growth and Income Fund (LUX)

• Launching in September 2019

• Strategy size of $95.4 billion

• Capital Group New Economy Fund (LUX)

• Launching in Q4 2019

• Strategy size of $21.8 billion

For illustrative purposes only. American Funds are not registered for sale outside of the United States. As at 31 March 2019, unless otherwise stated. Source: Capital Group

Capital Group

Organisational backgroundWe have size, scale and experience• Founded in 1931• $1.9 trillion AUM• Employee-owned• Investment management is our only

business • Focused on forming investment

partnerships that stand the test of time

Investment philosophy Our unique investment approach offers continuity, capacity and conviction• We have some of the most experienced

investment professionals, a deep bench and a commitment to sustaining our investment process over generations.

• The Capital SystemSM is designed to enable individual investment professionals to act on their highest convictions.

• We are aligned with your clients’ goals with a long-term perspective at the heart of our decision making.

PeopleWe have a global presence and significant resources1

• 7,200+ employees worldwide• 6,400+ in US offices• 800+ outside US offices

Marketing, training and servicingWe offer extensive support at a global and local level• Dedicated local servicing, marketing and

legal teams, offering local support, training and materials in over 11 languages

• Committed to building our brand

ProductOur investment offering is designed to help investors meet their long-term investment goals• Fundamental, long-only, research-intensive• Equity, fixed income and multi-asset

strategies• Funds and segregated accounts

We believe a collaborative approach is key to building long-term strategic partnerships

EU_01.CR-344108_0319

Why work with Capital Group?

All data as at 31 March 2019, unless otherwise stated. The Capital Group companies manage equities through three investment divisions that make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organisation; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups. Source: Capital Group 1. Data as at 31 December 2018.

Capital Group

Our focus is on enabling advisors to support their clients

52

Sales support/assisted selling programme/Capital Academy

Example of Capital Group videos webcasts, monthly commentaries

Sales tools summary (sales guides, videos, sales emails, assisted selling tools)

Targeted communications programme – to be customised for each market – e.g. PR/advertising/third-party press

Integration into firms’ marketing programmes

For illustrative purposes only.

Capital Group

www.capitalgroup.com/europe/capitalideas

53

For illustrative purposes only. Capital Ideas is the website providing investment thinking from Capital Group.

Capital Group

Capital Group

Trump and global markets: an analysis of 2+ years of a divided US government

Matt Miller –Political economist and corporate affairs advisor

Capital Group

Trump photo deck

55

Capital Group

Thank you

Capital Group

Capital Group strives to be the investment manager of choice for our investors and those who serve them

Our mission is to improve people’s lives through successful investing

Capital GroupCapital Group

Capital International Management Company Sàrl (CIMC)Registered office:37A avenue J.F. KennedyL-1855 Luxembourg

+352 27 17 621 Telephone+352 27 17 6290 Facsimilethecapitalgroup.com

Registered in Luxembourg, number: R.C. B 41.479

© Copyright 2018. All rights reserved.

CIMC.1297841_777

Regulatory informationThis material, issued by Capital International Management Company Sàrl (“CIMC”), 37A avenue J.F. Kennedy, L-1855 Luxembourg, is distributed for information purposes only. CIMC is regulated by the Commission de Surveillance du SecteurFinancier (“CSSF” – Financial Regulator of Luxembourg) and manages the fund(s) which is a (are) sub-fund(s) of Capital International Fund (CIF) or Capital Group Emerging Markets Growth Fund (LUX) (CGEMGLU), organised as an investment company with variable capital (SICAV) under the laws of the Grand Duchy of Luxembourg and authorised by the CSSF as a UCITS. All information is as at the date indicated unless otherwise stated and subject to change.

For Austria: A full list of Paying Agents is located on the website stated. This fund(s) may only be appropriate for long-term investment. For Denmark: The fund is recognised by Finanstilsynet (Danish FSA) for distribution to the public in Denmark.For Finland: The fund is recognised by Finanssivalvonta - Financial Supervisory Authority (FIN-FSA) for distribution to the public in Finland.For France: The details of the correspondant centralisateur are provided on the website stated.For Germany: A full list of Paying Agents and Distributors is located on the website stated. All legal documentation mentioned in this disclaimer are available in hard-copy and free of charge from the Paying Agent.For Ireland: Copies of the Prospectus, the Key Investor Information Document, the annual and semi-annual reports are available on simple request and free of charge in English at the facilities agent J.P. Morgan Administration Services (Ireland) Limited, J.P. Morgan House International Financial Services Centre, Dublin 1, Ireland as well as on capitalgroup.com/europe where the latest daily prices are also available. Income may fluctuate in accordance with market conditions and taxation arrangements. Past performance may not be a reliable guide to future performance. Changes in exchange rates may have an adverse effect on the value price or income of the product. The Prospectus and Key Investor Information Document set out risks, which, depending on the fund, may include risks associated with investing in emerging markets and/or high-yield securities these emerging markets are volatile and may suffer from liquidity problems.For Italy: A full list of Paying Agents and Distributors is located on the website stated. The source of data, statistics or graphs in the factsheets is Capital Group, unless otherwise stated.For Norway: The fund is recognised by Finanstilsynet the Financial Supervisory Authority of Norway for distribution to the public in Norway.For Spain: To obtain a list of distributors of the fund please visit CNMV.es. Capital International Fund (CIF) is registered with the Comisión Nacional del Mercado de Valores ('CNMV') under the number 983. Capital Group Emerging Markets Growth Fund (LUX) (CGEMGLU) is registered with the Comisión Nacional del Mercado de Valores ('CNMV') under the number 982. For Sweden: The fund is recognised by Finansinspektionen (FI) for distribution to the public in Sweden. The representative agent in Sweden is Nordea Bank AB, Smålandsgatan 17, 105 71 Stockholm, Sweden.For Switzerland: the Representative in Switzerland: Capital International Sàrl, 3 place des Bergues, 1201 Genève. Paying agent in Switzerland for CIF, CGEMGLU: JPMorgan (Suisse) SA, 8 rue de la Confédération, 1204 Genève. For UK: Most protections provided by the UK regulatory system do not apply to investment in the fund and compensation will not be available under the UK Financial Services Compensation Scheme. You should contact a financial adviser, and read carefully the latest Prospectus, Key Investor Information Document and Supplementary Information Document, including without limitation, the section on the risks as referenced below, if you are considering investing. Approved for issue in the United Kingdom by Capital International Limited, Registered office 40 Grosvenor Place, London SW1X 7GG. Authorised and regulated by the Financial Conduct Authority.

Risk factors you should consider before investing:• This material is not intended to provide investment advice or be considered a personal recommendation.• The value of investments can go down as well as up and you may lose some or all of your initial investment.• Past results are not a guide to future results. • If the currency in which you invest strengthens against the currency in which the underlying investments of the fund are made, the value of your investment will decrease.• The Prospectus and Key Investor Information Document set out risks, which, depending on the fund, may include risks associated with investing in fixed income, emerging markets and/or high-yield securities; emerging

markets are volatile and may suffer from liquidity problems.

Other important informationThe fund(s) is (are) offered only by Prospectus, together, with the Key Investor Information Document. The Prospectus, latest annual and semi-annual reports (available in English), the KIIDS (available in the following languages; Danish, English, French, German, Italian, Norwegian, Portuguese, Spanish and Swedish) for other share classes and latest daily prices are available free of charge from capitalgroup.com/europe. These documents, together any documents relevant to local legislation, contain more complete information about the fund(s), including relevant risks, charges and expenses, and should be read carefully before investing. However, these documents and other information relating to the fund(s) will not be distributed to persons in any country where such distribution would be contrary to law or regulation. They can be accessed online at www.capitalgroup.com/europe, where latest daily prices are also available.

The tax treatment depends on individual circumstances and may be subject to change in future. Investors should seek their own tax advice. This information is neither an offer nor a solicitation to buy or sell any securities or to provide any investment service.

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