Capital Group first launched ETFs less than two and a half years ago, but is not slowing down. The firm’s asset base is just under $35 billion, aided by nearly $10 billion thus far in 2024.
In June, the active management firm added seven new actively managed products. Capital Group executives were in New York last week to ring the closing bell at the NYSE. While there, they hosted advisor educational sessions. VettaFi was honored to join the team.
“Advisor education about ETFs is key,” explained Holly Framsted, the firm's Head of Global Product Strategy and Development. “We want to help advisors’ support clients in the accumulation phase as well as those entering the decumulation phase.”
New Capital Group Active Equity ETFs
Indeed, the firm positioned two of the new active equity ETFs for more risk-conscious investors nearing retirement. The Capital Group Conservative Equity ETF (CGCV) is a U.S. equity ETF conservatively seeking growth and income. The fund owns what management views as well-established companies with strong balance sheets and a history of dividend payments. This approach is expected to help reduce volatility. Recent holdings include AbbVie, JPMorgan Chase, and Union Pacific.
The firm also launched the Capital Group International Core ETF (CGIC), which takes a similar approach to CGCV but focuses primarily on international equities. Airbus, AstraZeneca, and NovoNordisk are some of CGIC holdings.
In 2022 and 2023, the Capital Group Core Equity ETF (CGUS) and the Capital Group International Equity ETF (CGIE) launched and has had success in gathering assets. However, we think the newer products could appeal to more risk-conscious investors.
A Unique Approach to Emerging Markets
Meanwhile, we think a third active equity ETF that launched in June 2024 helps fill a hole in the firm’s asset allocation lineup. The Capital Group New Geography Equity ETF (CGNG) is focused on emerging markets but in a differentiated way. Many emerging market ETFs are market-cap weighted and only own stocks domiciled in certain developing markets.
"We have decades of experience managing emerging market strategies that go beyond whether a company is located in China or India,” noted Scott Davis, the firm's Head of ETFs. “Our approach looks at where a company derives its revenue and is inclusive of companies listed in developed and developing markets who are benefiting from the growth of emerging markets.”
Indeed, CGNG recently had a 25% stake in US companies like Microsoft and NVIDIA which offered diversification beyond Mercado Libre, Taiwan Semiconductor, and Tencent. Including U.S. companies is likely to dampen the volatility relative to a broad index-based emerging markets strategy.
CGNG’s approach is somewhat similar in style to the firm’s American Funds New World Fund (NEWFX), a $72 billion and Morningstar four-star rated mutual fund. However, like the firm's other active ETFs, CGNG is not a clone or an ETF share class of NEWFX. Rather, CGNG is a more risk-aware approach to emerging markets for ETF-minded advisors and clients run by experienced managers.
Rounding Out the Capital Group Active Lineup
The firm now has 21 ETFs, led by the $9.1 billion Capital Group Dividend Value ETF (CGDV) and the $6.5 billion Capital Group Growth ETF (CGGR). Six other products have more than $1 billion including a pair of actively managed fixed income ETFs. Those are the Capital Group Core Plus Bond ETF (CGCP) and the Capital Group Municipal Income ETF (CGMU).
Based on regular surveys of advisors, VettaFi believes adoption of actively managed equity and fixed income ETFs remains in the early stages.
Capital Group’s lineup has quickly formed out to support registered investment advisors. They also bolster those advisors working at wirehouses to build model ETF portfolios. The recent expansion should further help those less risk tolerant.
For more news, information, and analysis, visit VettaFi | ETF Trends.
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