Just about three years have passed since Capital Group entered the ETF ecosystem. Responding to advisor demand, per head of ETFs Scott Davis, the firm added six core strategies in the ETF wrapper. Since then, the firm’s ETF suite has expanded to 22 ETFs, and per Davis, the firm was the fastest organically growing active ETF manager in 2024. Davis sat down with VettaFi at the ETF Exchange conference in Las Vegas to discuss the firm’s suite, its use cases, and some key observations about active ETFs this year and into the future.
Capital Group's Davis on Active ETFs
For those unfamiliar, Capital Group touts its “Capital System” as a key aspect of its investing approach. The Capital System, Davis explained, is a bottom-up, research-driven approach. The firm had over 20,000 meetings with companies in 2024, he said, with analysts identifying high-conviction opportunities.
What’s more, the firm emphasizes a “team management” approach to its portfolios. That helps produce a more diversified approach relative to a star manager system, he said.
“In a system that has multiple managers with multiple perspectives, you can get a better and more diversified portfolio with those different perspectives that will … in different time periods come to show their worth,” Davis said.
Davis, who joined the firm in 2011, pointed to the firm’s ETF models as a big item to watch. The firm recently launched eight all active ETF models intended to serve a variety of goals like income or growth.
“We had some research we did where two-thirds of the fastest-growing advisors were using models in their practices because it gave them the ability to scale their investment management and spend more time with clients,” he explained.
Capital Group’s approach to models may offer an intriguing way to get more out of active investing. Per Davis, the firm’s model allocators make strategic decisions, but leave the underlying managers of the underlying funds the freedom to adjust in real time.
Within the firm’s suite, the Capital Group Dividend Value ETF (CGDV ) currently holds the largest AUM total, at $14.6 billion. Charging 33 basis points, the fund actively invests in large and midcap dividend-paying stocks.
New Research on Active
Amid growing excitement around active ETFs, the company also recently released new research on Gen X, millennial, and Gen Z investors. The firm’s survey found that nearly half of investors in those age groups were more likely to choose a financial professional who offers active ETFs.
That research found that Millennials and Gen X investors identified diversification as a key benefit of active by large margins. That diversification preference outpaced concerns about active ETF fees, the survey suggested. That may undercut some beliefs that younger investors are particularly concerned about fees.
Surveying the ETF landscape at the conference and beyond, Davis pointed to fixed income ETFs as an area to watch.
“I am hearing quite a bit about is fixed income ETFs,” he noted.
“It’s been a growing part of each of these conferences, but when I look at the new product development and fixed income, it’s one of the highest areas of active ETF growth,” Davis added, pointing to Capital Group’s rapidly growing fixed income ETFs.
For more information, please visit VettaFi.com | ETF Trends.
