American Funds, the country’s largest asset manager, is betting that the global economic downturn will lead to more returns than its 401k and other investments.
American Funds’ chief executive officer, Bill Schwab, told investors in a recent conference call that hedge funds have a strong opportunity to take the world by storm.
American funds are among the most popular mutual funds on Wall Street, and Schwab said they’re a key reason investors are buying more stocks and bonds.
Hedge funds, however, can be tricky investments, and the returns on those strategies have been less than stellar.
American is making it easy for hedge funds to invest.
The company has recently been using a software tool to allow hedge funds and ETF companies to track the performance of individual fund stocks and ETF portfolios.
American also offers a tool to make it easy to track a fund’s portfolio holdings.
American will pay hedge funds an upfront fee to track funds and a management fee of 10 percent, Schwab told investors.
American and other fund companies can also sell their portfolio holdings to other fund owners at an annual fee of 1.75 percent.
The funds’ management fee will also be reduced by 1.5 percent, according to Schwab.
Schwab also said American will set up an automated trading system that will help hedge funds compete with its own clients.
American has been investing heavily in ETFs over the past year.
The ETF industry, which was worth about $1 trillion last year, has grown to more than $2 trillion.
But the industry has seen more than 2,300 fund companies collapse or become liquidated, according.
American’s investment has come at a time when many hedge funds are trying to capture more of the market, and it’s also helped push shares of mutual funds down.
The fund industry’s collapse has also pushed the average yield on a fund to a record low of just 0.1 percent.
Schwabs latest announcement follows a similar one last month by the New York Stock Exchange, which said that hedge fund manager and ETF company BlackRock had filed for bankruptcy.
The collapse of the stock exchange’s hedge fund business was the first major failure for a hedge fund in more than two decades, and investors are not happy about the outcome.
Shares of BlackRock have dropped nearly 9 percent since the start of the year, and BlackRock has since declared a $5 billion funding round for a fund that was originally founded to help hedge fund clients.
The news of American Funds plans to give hedge funds a run for their money came as the hedge fund industry was in free fall.
In March, American said it was buying up about $5 trillion of stocks and $1.6 trillion of bonds.