In the most recent episode of “ETF 360,” VettaFi head of research Todd Rosenbluth was joined by Capital Group’s Vince Gonzales to discuss the Capital Group Short Duration Income ETF (CGSD).
After launching their first 6 ETFs back on February 22nd, 2022, Capital Group launched 3 fixed income ETFs in October. In just over 9 months, despite a challenging market, the 9 ETFs have managed to rack up over $5 billion in AUM. “We’re quite pleased with that progress so far,” Gonzales said, continuing, “we’re able to provide a highly complimentary suite of offerings to our investors for whatever their goals might be in fixed income.”
Active fixed income funds, such as CGSD, tend to consistently outshine their passive counterparts, according Gonzales. “That’s why 80% of all fixed income mutual funds are actively managed. Now contrast that with the ETF universe where only about 13% of fixed income ETFs are actively managed.” Gonzalez sees this as a supply driven problem that products like CGSD can help assuage. “So much of the value add is quite structural and repeatable,” Gonzales noted, describing how the value add of actively managed fixed income becomes more pronounced in volatile markets like the one today.
CGSD rounds out Capital Group’s short duration bond offerings, providing a compelling value proposition to investors, according to Gonzales. He said, “we are able to provide a combination of quality, diversification, and active attractive income with very low interest rate sensitivity.” The fund currently yields about 6% with less than two years in duration. Gonzales offered that this is about 150 basis points above the Barclay Agg which less interest rate risk.
Speaking to the credit market, Gonzales said there were plenty of compelling opportunities there. “An area we think offers great opportunities at the front end of the curve is in securitized credit.” Securitized credit offers a diverse range of credit exposures.
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