american funds is cutting the fees on 18 of its funds its parent company capital group announced monday may 2 the change applies to funds with current assets of less than 15 billion resulting in a potential for over 20 million in fee savings for investors over the next 12 months according to company estimates the timing of the cuts is interesting as 12 of the funds with fee reductions are bond funds and bonds have taken a beating in 2022 thanks to rising inflation and interest rates the popular bloomberg us aggregate bond index is down almost 10 in 2022 so even though morningstar rates one of the funds receiving feecuts the 33 billion american funds multisector income miaqx five stars for its outperformance it’s still down 82 in 2022 as of april 28 the fact that its management fee is dropping from 042 to 033 may be cold comfort to its investors yet because of the interest rate surge bonds are more interesting today than they have been in a while “one of the things that we’ve been encouraging clients to recognize is that the starting yields for bonds in the bloomberg us aggregate bond index is 35 when a year and a half ago it was 13” says maddi dessner capital group’s director of global asset class services “that will get you a pretty meaningful return for the balance of the year” so now is a good time to reward investors who believe the bond carnage is over american funds historically has been more well known as a stock picking shop but it has been aggressively moving into fixed income in recent years its bond fund assets have more than doubled in the past five years to 500 billion—now almost a fifth of the management company’s 27 trillion perhaps more impressive it has received 29 billion in new fund flows into its bond funds in 2022 through march 31 making it the top fund company in terms of fixedincome fund flows this year the lower expenses are a nice selling point among the steepest management fee cuts are american funds corporate bond bfcax from 036 to 025 american funds emerging markets bond ebnax from 055 to 046 and american funds shortterm taxexempt bond astex from 033 to 020 in equities two big cuts are for american funds international vantage aivbx from 060 to 048 and american funds developing world growth  income dwgax from 073 to 065 most of the other cuts are much smaller like to the topperforming 11 billion american funds strategic bond anbax from 030 to 028 generally speaking the smaller the fund is assetwise the bigger the fee cut applied says dessner the logic behind this is that larger funds can reduce fees on their own through economies of scale that said management fees are only a portion of fund investors’ total costs as expense ratios also include administrative and brokerage costs so even though american funds multisector income’s management fee dropped from 042 to 033 its total expense ratio for its “a” share class was 082 prior to the cut indicating a likely 073 ratio postfeecut that’s a far cry from the 004 expense ratio investors pay for the ishares core us aggregate bond etf agg yet lowering the fee hurdle should make it easier for american funds to outperform in the future