Capital Group has found a strong audience for their actively managed core focused ETFs with an impressive $3.6 billion of ETF assets under management despite launching their first ever ETF products in February 2022 and market headwinds. The firm, which also offers a broad range of active mutual funds under the American Funds brand, launched three new fixed income ETFs today.
As we wrote in July when the company announced its expansion plans, like the Capital Group Core Plus Income ETF (CGCP), the three ETFs are actively managed through a team approach and fully transparent:
- Capital Group Municipal Income ETF (CGMU)
- The fund’s investment objective is to provide a high level of current income exempt from regular federal income tax, consistent with the preservation of capital.
- Capital Group U.S. Multi-Sector Income ETF (CGMS)
- The fund’s investment objective is to provide a high level of current income. Its secondary investment objective is capital appreciation. The fund will invest a minimum of 80% with issuers domiciled in the U.S.
- Capital Group Short Duration Income ETF (CGSD)
- The fund’s investment objective is to provide current income, consistent with a short duration profile and with preservation of capital.
“Benchmarks do not recognize the full universe of investment opportunities,” explained Ryan Murphy, Director, Fixed Income Business Development at Capital Group. “The ability for active managers to navigate when we see turns in the market like in 2022 is important to our clients.”
While the firm offers actively managed mutual funds in the broad investment style as the pending ETFs, the ETFs are not clone strategies. For example, Capital Group offers an investment-grade focused mutual fund, the Tax Exempt Bond Fund of America (AFTEX) and a higher yielding mutual fund peer American High-Income Fund (ABHIX) that invests more in lower-rated bonds. According to Murphy, CGMU will be more of a blend of the two mutual fund strategies and be a “one-stop shop” for an advisor’s municipal bond needs.
“Our goal is to round out our lineup when portfolio rebalancing is top of mind for advisors,” noted Holly Framsted, Director of ETFs at Capital Group. “Tax loss harvesting discussions are regularly occurring and advisors are looking for help from asset managers in managing duration and credit risk.”
With these three new products, Capital Group’s ETF lineup can further align with an advisor’s asset allocation strategy. Previously, the firm offered five equity ETFs and just one fixed income product. The Capital Group Dividend Value ETF (CGDV) and the Capital Group Growth ETF (CGGR) are the firm’s two largest ETFs with $852 million and $802 million, respectively. But the two other international equity ETFs have more than $500 million in assets.
Since the February 2022 launch the suite of ETFs incurred net inflows every day but three according to Capital Group.
“The steady ongoing demand for our ETFs has provided liquidity for clients and is indicative of the broad investor base we have”, explained Framsted. “We have counseled advisors to take a long view toward asset allocation and are pleased with the demand thus far.”
As Capital Group nears its one-year anniversary in the ETF market, it is clear that advisors and investors have faith in the firm. But with any new product, education is paramount.
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