Capital Group Unveils Active Bond ETFs

Industry newcomer adding hands-on options as investors seek shelter.

etf
|
Reviewed by: Zoya Mirza
,
Edited by: Zoya Mirza

Capital Group, which issued its first exchange-traded funds less than a year ago, unveiled a trio of ETFs as it seeks to tap into rising demand for actively managed investments. 

Los Angeles-based Capital, with $2.2 trillion of assets under management, launched three fixed income ETFs on Thursday, increasing its portfolio to nine. 

Investors are increasingly choosing active management over passive options like index funds, as they seek protection from falling bond and stock markets and investments tracking them. Nearly 63% of all active funds have beaten their benchmarks since May, according to Morningstar data. 

Capital jumped into the ETF market in February, and was one of the last big money managers to do so.  

“In this market environment, investors are looking for professional managers to manage spread and duration risk,” said Holly Framsted, director of ETFs at Capital Group, in an email to ETF.com. Capital’s ETFs have assets of more than $3.5 billion. 

So far this year, $65.8 billion has gone into actively managed ETFs, about 15% of the $453 billion for all exchange-traded funds, according to ETF.com data. About one-third, or 934, of all ETFs are active. 

The new additions include the Capital Group Short Duration Income ETF (CGSD), which pursues high quality income with low interest rate sensitivity, the Capital Group Municipal Income ETF (CGMU), which tracks tax exempt income consistent with capital preservation while seeking total return, and the Capital Group U.S. Multi-Sector Income ETF (CGMS), which pursues a high level of current income and presents an opportunity for capital appreciation. 

All three ETFs—CGSD, CGMU and CGMS—list on the New York Stock Exchange and come with expense ratios of 0.25%, 0.27% and 0.39%, respectively.  

They compete with other ETFs already present in the fixed income space, such as the Vanguard Total Bond Market ETF (BND), the iShares U.S. Treasury Bond ETF (GOVT) and the SPDR Bloomberg High Yield Bond ETF (JNK)

Bond ETFs have cemented their status as an integral staple in investor portfolios—especially those looking to diversify—offering a source of steady income and relatively low volatility, while offering an alternative to mutual funds that trades like a stock. 

 

Contact Zoya Mirza at [email protected] 

Zoya Mirza is a markets reporter at etf.com. Her work has appeared in USA Today, Voice of America, and United Press International, among others. Mirza is a graduate of Northwestern University’s Medill School of Journalism. Her past experiences include editorial work in book publishing and conducting political analysis for NGOs and think tanks. Mirza is a passionate bibliophile and collects vintage postcards from every bookstore she visits in a new city.