Capital Group Expands ETF Lineup After Early Success

Capital Group became the last mutual fund giant to embrace ETFs with the launch of six active transparent strategies in February 2022. The $2.7 trillion asset manager hired BlackRock veteran Holly Framsted to lead its foray into lower-cost funds. And in just five months, the new funds have about $2 billion in assets under management.

The asset manager’s existing funds include:

 

Data as of July 19, 2022 via Morningstar.

In an interview with CityWire this February, Framsted called the move into ETFs a “deliberate, controlled effort” with a smaller lineup than BlackRock’s iShares, Invesco or State Street Global Advisors. In addition to the newly launched fixed income ETFs, she suggested that the company may move beyond the large-cap space with future funds.

Fixed income has become a natural fit for active strategies. With rising interest rates and a potential recession around the corner, market cap-weighted bond funds prioritizing the most indebted issuers could see trouble. On the other hand, active managers have the flexibility to balance yield with credit risk to optimize risk-adjusted returns over time.

Capital Group recently filed with the SEC to launch three new active fixed-income ETFs to capitalize on these benefits and unlock value for its investors.

The asset manager’s new funds include:
 

• Capital Group Municipal Income ETF (CGMU) – The fund aims to provide a high level of current income that’s exempt from regular federal income tax via municipal bonds, consistent with the preservation of capital.

• Capital Group US Multi-Sector Income ETF (CGMS) – The fund aims to provide a high level of current income with capital appreciation as a secondary investment objective. A minimum of 80% of assets is invested in U.S. issuers.

• Capital Group Short Duration Income ETF (CGSD) – The fund aims to provide current income that’s consistent with a short duration profile and a preservation of capital.

Capital Group has seen tremendous success since launching six ETFs earlier this year. With the launch of three new active fixed-income funds, the asset manager is capitalizing on a trend toward active management in the bond space. In addition, investors should keep an eye on the asset manager over the coming months for additional non-large-cap equity funds.

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