Capital Group Aims at Advisors With Active ETFs
Capital Group is launching seven new exchange-traded funds, four equity and three fixed-income ETFs, including the firm’s first emerging-markets equity ETF.
Los Angeles-based Capital Group's largest ETF launch to date brings its lineup to 21 actively managed ETFs.
Capital Group entered ETF business in February 2022 when it launched six ETFs. At the time it was better known as a mutual-fund provider whose funds were a mainstay in 401(k) plans.
The Los Angeles-headquartered firm has moved into the top 20 of all ETF issuers, with $30.8 billion in ETF assets under management across the 14 strategies it had prior today’s announcement. The fund manager says it has captured 8% of all active ETF flows through May, against a backdrop of active ETFs capturing 32% of total ETF industry flows through May.
Active ETFs and Advisor Demand
The new ETFs were launched in response to financial-advisor demand.
“We're adding these seven to help us provide additional core building blocks for advisors as they build portfolios with our ETFs,” says Scott Davis, head of ETFs for Capital Group.
ETF Name | Expense Ratio |
Capital Group New Geography ETF (CGNG) | 0.64% |
Capital Group Global Equity ETF (CGGE) | 0.47% |
Capital Group Conservative Equity ETF (CGCV) | 0.33% |
Capital Group International Core Equity ETF (CGIC) | 0.54% |
Capital Group Ultra Short Income ETF (CGUI) | 0.18% |
Capital Group International Bond ETF (CGIB) | 0.45% |
Capital Group Municipal High-Income Bond ETF (CGHM) | 0.34% |
Davis highlighted the firm’s emerging-markets equity ETF, CGNG, embodies how Capital Group approaches the region. The firm launched one of the first emerging-market equity mutual funds in the 1980s, and has built up active management expertise there.
“It’s a strategy that's really designed to benefit from the growth in emerging markets … no matter where they may have their headquarters. We like to say (we invest) ‘where they get their revenues, not where they get their mail,’” Davis says.
The other equity ETFs, CGGE, CGCV and CGIC, balance growth and income, he says. CGGE invests primarily in U.S. high-quality large-cap companies with sustainable dividend-paying prospects, while CGCV is a global large stock blend fund, focusing on U.S. and non-U.S. developed market exposure, and CGIC benchmarks the MSCI ACWI ex-U.S. and will fall into the Morningstar foreign large-blend.
All three focus on companies which traditionally show resilience in market downturns, while seeking some growth to deliver smoother returns. These balanced funds complement the mostly growthier equity ETFs the firm already offers. The funds are suitable for investors in the mid to latter part of their accumulation phase and also in their distribution phase, Davis says.
The bond funds include CGUI, a short-maturity fund which will have an average portfolio duration of one year or less with an aim to provide income, capital preservation and liquidity, Davis says, using a range of fixed income sectors including money market, corporate and securitized bonds.
The short-duration ETF gives Capital Group an opportunity to tap into one of the hottest fixed income sectors for investors right now.
Click the chart for a full list of funds. Source etf.com
CGIB, an international bond ETF will be currency-hedged to reduce volatility and is focused on non-U.S. interest-rate securities and credits. CGHM is a high-yield muni ETF and now is the third muni ETF from the firm, complementing the firm’s short and intermediate duration muni ETFs.
Davis says Capital Group is excited over the growth potential for active bond ETFs and for the fixed-income space in general.
“We see the history of the fixed income market on the mutual-fund side. We see the preference for active management and the ability for managers to deliver excess returns over benchmarks, and we're excited to bring that to the ETF space,” he says.
Capital Group's largest fund is the $8.81 billion Capital Group Dividend Value ETF (CGDV) which has gained 12% this year.