James Rothenberg, chairman of the $1.4 trillion Capital Group Companies, died on July 21 of a heart attack, according to a press release issued by the company.
Rothenberg was based in Los Angeles, the firm’s headquarters, and served as CIO and manager of the Growth Fund of America, the largest single actively managed equity fund in the world.
AsianInvestor and FinanceAsia interviewed him on June 18 during a visit to Hong Kong, in which he outlined his firm’s ambitions to expand into the Asian retirement product market.
Capital’s American Fund series is the second-largest mutual fund complex in the US, having been overtaken in 2007 by Vanguard’s index funds, but Rothenberg remained an evangelist of active management.
“Active managers didn’t do well in 2008-2009, so the answer has been to avoid them by asset allocating and indexing,” he told AsianInvestor in June. “I think anyone taking that approach has to be reminded that if markets go down, you get 100% of that fall. Indexing won’t save you from down markets.”
Rothenberg was part of the firm’s leadership team during Capital’s build-up into the world’s biggest manager of emerging-market equities. It also pioneered the notion of investing in multinationals based in North America and Europe to capture emerging-market growth.
Capital was also an early player in developing business from institutions in emerging markets, such as forging a relationship with Government Investment Corporation of Singapore (GIC) in the 1980s. Rothenberg was not the point person for those deals but as chairman continued to keep those relationships active.
“The mandates we have with GIC today are different and the relationship has changed, but I just had a nice visit with them and we continue to share ideas,” he said. The firm manages $16 billion from Asia Pacific-based clients.
One area the firm did not develop into a strong franchise is fixed income, which the leadership acknowledges was a mistake, according to an account of the firm’s history written by Charles Ellis. But Rothenberg was never a fixed-income fan.
“I’m an equities guy, so I’m biased,” he told FinanceAsia, “but I don’t own long-term bonds. You don’t get paid enough, and you’re not getting enough of a spread for the risk you take if you move down the risk curve. It makes far more sense to expect growth in the equities world.”
Asked about the equity bubble developing in China – it had yet to pop during his Hong Kong visit – he argued that the size and characteristics of China warranted a standalone status, rather than inclusion in the MSCI Emerging Markets Index.
“I think you should pull China out of the EM bucket,” he said to FinanceAsia. “What does that leave you? The US, China, the rest of the developed world, and emerging markets. I think that’s how people will think about asset allocation. The China issue is size, how it is construed in an index. Professional investors have to make an explicit decision about China.”
Rothenberg joined Capital Group in 1970 as an analyst. He continued to invest client assets even as he took on senior management roles. He also served as chairman of Harvard Management, which invests the university’s $36.4 billion endowment, and was a philanthropist.