Question about the "Eligible List" for American Funds Washington Mutual

WABAC

The prospectus states:

The fund has Investment Standards originally based upon criteria established by the United States District Court for the District of Columbia for determining eligibility under the Court’s Legal List procedure, which was in effect for many years. The fund has an “Eligible List” — based on the Investment Standards — of securities considered appropriate for a prudent investor seeking opportunities for income and growth of principal consistent with common stock investing.

I am curious about the criteria used by the District Court when they were in effect. Google being what it is these days, I could spend a long time searching the internet for that answer. I am hoping someone here can please point me in the direction of more information on the topic, or otherwise provide it.

Old_Joe

Using DuckDuckGo it was easy to find extensive current information on the United States District Court for the District of Columbia, but I would think that for rule sets no longer in use a visit to a specialized legel library might be required.

rforno

I suspect it's just a list of companies the Court believed at the time reflected the investing goals of the fund. (nb: I hold a *very* large long-term position in my 403(b) and recently switched my Roth IRA into it as well.)

Eligible Lists are pretty self-explanatory in the legal and certification sectors: did you pass the exam or other official criteria? You're eligible.

AF WaMu is often called the 'windows and pensioners' fund, and for good reason.

Old_Joe

Maybe "widows and pensioners"?

We had Washington Mutual and many other American Funds for many years- we largely built our present economic situation on American Funds. Worked for us.

mskursh

The Legal List idea is kind of outdated now. It was replaced in most jurisdictions by the Prudent Investor Rule, especially after the Uniform Prudent Investor Act was adopted by most U.S. states starting in the 1990s. As Modern Portfolio Theory became more widely accepted, fund managers moved toward broader risk-adjusted return frameworks that include a wider variety of asset classes and sectors. Obviously, many funds still follow its the style, but most don’t really talk about it anymore in their marketing or official rules. One big exception is Washington Mutual Investors.

as far as criteria the courts used, it was largely credit quality, dividend history, established blue chippiness, avoiding high risk (junk bonds, penny stocks), needed income focus and there were even industry and sector restrictions.

WABAC

mskursh said:

The Legal List idea is kind of outdated now. It was replaced in most jurisdictions by the Prudent Investor Rule, especially after the Uniform Prudent Investor Act was adopted by most U.S. states starting in the 1990s. As Modern Portfolio Theory became more widely accepted, fund managers moved toward broader risk-adjusted return frameworks that include a wider variety of asset classes and sectors. Obviously, many funds still follow its the style, but most don’t really talk about it anymore in their marketing or official rules. One big exception is Washington Mutual Investors.

as far as criteria the courts used, it was largely credit quality, dividend history, established blue chippiness, avoiding high risk (junk bonds, penny stocks), needed income focus and there were even industry and sector restrictions.

Thank you for the detail. I now have some new search terms.

In addition to a bazillion share classes, American Funds has a lot of strategies that seem very similar to each other.

Old_Joe

"American Funds has a lot of strategies that seem very similar to each other."

True.

rforno

Old_Joe said:

Maybe "widows and pensioners"?

We had Washington Mutual and many other American Funds for many years- we largely built our present economic situation on American Funds. Worked for us.

LOL give me a break, it's a Friday in summertime!

I am also very heavy in AF equity funds for the long-haul and they've worked well for me, too.

Old_Joe