The changes in the perception of how to build a portfolio brought about by the different problems in the economy has changed the fates of two mutual fund giants.

The Wall Street Journal reports that the Vanguard Group [profile] benefited as investors brought money to index funds, including ETFs, while American Funds [profile] suffered as clients moved about from the core stock products they offer.

Managers are now trying to get exposure to segments through investing in lower-cost index-based portfolios, which are often availed through ETFs.

Jack Bogle, Vanguard founder, is now enjoying the fruits of his then-controversial do-it-yourself investing. It also saw $58 billion in new money during the first six months of the year.

Vanguard has been enjoying the ETF sphere. Martha King, who heads Vanguard's advisor-services group, said three-quarters of the new investments that Vanguard ETFs receive are from advisors.

Meanwhile, American Funds has suffered from the lack of attractive bond offerings and stock funds that underperformed. This giant has suffered outflows for 36 consecutive months, making assets drop by 9 percent.

American Funds has started to explore ETF offerings. Kevin Clifford, American Funds Distributors president, said that bond ETFs "could be a down-the-road potential." He added, "ETFs are here to stay, indexing is here to stay. It's anything but business as usual around here."  

Edited by: HFD


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