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American Funds plans new cuts, no merit raises

March 18, 2009|Tom Petruno

Hard times for the mutual fund industry will mean more layoffs at Los Angeles-based titan American Funds, and no merit pay increases this year for remaining employees, the company confirmed Tuesday.

It's another sign of the drastic shrinkage of the financial services industry as the stock market has suffered its biggest dive since the 1930s: Layoffs and pay freezes had been virtually unheard-of at American Funds in its 80-year history.

The privately held firm -- the second-largest U.S. manager of stock and bond mutual funds, with about $700 billion in assets -- has a reputation for being benevolent to its workers. That has kept turnover low, fostered staff loyalty and contributed to the millionaire ranks of Southern California.

But after assets dived from $1.1 trillion a year ago, the firm's parent, Capital Group Cos., cut 500 jobs worldwide in January, spokesman Chuck Freadhoff said. That reduced total staff to about 9,000.

Many of the January cuts were in technology and office services jobs, Freadhoff said. The next wave is expected to be companywide, he said, "given market conditions and our need to cut costs."

The company's new layoff warning was first reported Tuesday by the online fund-industry newsletter ignites.com.

Capital Group employs about 2,500 people in California, mainly in Los Angeles and Orange counties. That includes portfolio managers, analysts and service representatives.

The firm said in January that senior managers wouldn't get merit raises this year, Freadhoff said. The freeze now is staff-wide, he said.

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tom.petruno@latimes.com

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