Capital Group Digs Deeper Into ETF Market With 5 New Funds

The latest launch of five more actively managed ETFs underscores Capital Group’s commitment to the category, while also illustrating how even latecomers to the ETF market can make a big splash. 

The $2 trillion asset manager, known largely for its popular American Funds mutual fund brand, has grown to more than $12 billion in ETF assets since it launched its first funds in February 2022. 

Of the initial six Capital Group ETFs, all have grown to more than $1 billion, including the Capital Group Dividend Value ETF (CGDV), at more than $3 billion. 

The five new strategies and objectives include: 

• Capital Group Core Balanced ETF (CGBL) 
• Capital Group Core Bond ETF (CGCB) 
• Capital Group Short Duration Municipal Income ETF (CGSM)  
• Capital Group Dividend Growers ETF (CGDG)  
• Capital Group International Equity ETF (CGIE) 

“Capital Group has been one of the industry’s biggest success stories since they came to market,” said Nate Geraci, president of The ETF Store. 

“While late to the ETF party, the firm is showing that a strong brand, proven investment pedigree and robust distribution can make up for lost time,” he added. “In hindsight, the timing of their ETF entrance ended-up being opportune given the recent momentum around active products.” 

Good Timing for Capital Group

The timing was nearly perfect for Capital Group, which has been riding the wave of active ETF popularity. According to Morningstar, active exchange-traded funds represent just 6% of all ETF assets, but make up 23% of net inflows so far this year. 

Bryan Armour, director of passive strategies research at Morningstar, said with $5 billion worth of net inflows this year through August, Capital Group ranks fourth among active ETF issuers, and eighth among all active ETF issuers in terms of total assets. 

On the trend of legacy mutual fund shops like Capital Group getting over their reluctance and embracing the transparent active ETF model, Armour said, “People are realizing transparency is a worthwhile tradeoff for entering the ETF market.” 

Scott Davis, Capital Group’s head of ETFs, said the migration into ETFs and the growing roster of strategies is a response to demand from financial advisors. 

“What’s driven our development is what we’ve heard from advisors,” he said.

Balanced ETF  

The new Capital Group Core Balanced ETF is a prime example of how the ETF lineup is being tailored to the needs of advisors.  

“The balanced fund represents Capital Group’s long-held capabilities in the multi-asset strategies area,” Davis said. “Balanced funds and multi-asset funds are not a mature category in the ETF space, but it’s the most requested strategy from advisors.” 

The balanced fund is designed as a core allocation of 60% stocks and 40% bonds, with the equity side being made up of individual securities and the bond side populated with fixed income ETFs. 

Vance Barse, founder of Your Dedicated Fiduciary, acknowledging the trend of $1 trillion moving out of mutual funds last year while $600 billion moved into ETFs, chided Capital Group for its late move into the ETF market. 

“If you can’t beat ‘em, join ‘em,” Barse said, adding that Capital Group is adjusting to market demand for active strategies that are easy to use. 

“There’s an appetite for strategies that can outperform passive indices,” he added. “Capital Group’s product lineup represents the shift in advisor demand in active strategies in a passive-like wrapper.” 

Contact Jeff Benjamin at [email protected] and find him on X: @BenjiWriter