Capital Group’s Tim Armour Makes The Case For Actively Managed Funds

Warren Buffett for years has recommended that investors simply put their money into a passive index fund that follows the S&P 500 and to ignore actively managed funds. His reason for this is that, especially due to the higher fees charged in actively managed funds vs. passive, most managers of funds can’t produce a larger return than what the passive fund can.

Tim Armour, the Chairman and Chief Executive Officer of Capital Group Companies, Inc., makes the case that actively managed funds do have a place in most investor’s portfolios.

Armour agrees that most actively managed funds charge far too much in fees and deliver mediocre results as best. Those are best avoided by investors. He argues, however, that an actively managed fund with low fees, that don’t trade excessively, and that the manager has his own money in can and do outperform passively managed funds. The reason for this is that, unlike the active manager who don’t “earn their keep”, these managers do their proper research. They also have the ability to mitigate losses when the markets fall while a passive fund will fall along with the market.

Tim Armour was elected as Chairman of the Board at Capital Group in July 2015. Capital Group’s prior Chairman, Jim Rothenberg, had unfortunately passed away after an illness. Armour had already been serving as the Chairman of the company’s management committee and the Chairman of Capital Research and Management Company. He has spent his entire professional financial career with Capital Group, first starting in the company’s The Associates Program.

Armour continues to work as an Equity Portfolio Manager at Capital Group. Among the other positions he has held is Equity Investment Analyst where he focused on American service companies and global telecommunications. In 1983 he graduated from Middlebury College where he earned a Bachelor’s Degree in Economics.

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