Last ETF Holdout Caves as Capital Group Moves to Launch Funds

He said most of the flows into active funds go into ETFs that have highly concentrated, thematic strategies, like Cathie Wood’s Ark funds.

“Going through the mutual fund world to the ETF world is a little bit like going from a country club into the Amazon jungle,” he said. “You have to sell to these very picky cost-obsessed advisers. You have to battle Vanguard who has basically everything now for under five basis points. And then you have to sort of sell against these shiny objects like Ark and Bitcoin.”

Capital Group’s Framsted said that before the Securities and Exchange Commission’s 2019 regulatory changes a lot of advantages of ETFs were constrained to index or passive funds, with the new regime since opening an opportunity for active strategies.

As so-called fully transparent ETFs, all the holdings of each Capital Group fund will be revealed each day. Other mutual fund giants like Fidelity and T. Rowe Price Group Inc. have entered the ETF market using active non-transparent funds, only to see those struggle to gain traction.

“Unlike some of its peers’ active equity ETFs, Capital Group’s offerings will be fully transparent and have the flexibility to invest outside of the U.S., which should help the ETFs differentiate from benchmark based funds,” said Todd Rosenbluth, an ETF analyst at CFRA who anticipates Capital Group will become a “top-tier ETF provider” in the next few years.

Framsted said at the moment, Capital Group is not planning on converting any of its mutual funds into ETFs.

Editor’s note: The following funds are set to launch Thursday, with management fees of 0.33-0.54%:

Capital Group Growth ETF (CGGR)
Capital Group Core Equity ETF (CGUS)
Capital Group Dividend Value ETF (CGDV)
Capital Group International Focus Equity ETF (CGXU)
Capital Group Global Growth Equity ETF (CGGO)
Capital Group Core Plus Income ETF (CGCP)

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