VIDEO: ETF of the Week: CGMU

Chuck Jaffe: One fund, on point for today. The expert to talk about it. Welcome to the ETF of the Week!

Yes, this is the ETF of the Week, where we examine trending, newsworthy, unique, and intriguing exchange-traded funds with Todd Rosenbluth. He’s the head of research at VettaFi. And if you go to VettaFi.com, you’ll find all the tools you need to make yourself a savvier and smarter investor in ETFs.

Todd Rosenbluth, it’s great to chat with you again!

Todd Rosenbluth: It’s great to be back.

Chuck Jaffe: Your ETF of the Week is…

Todd Rosenbluth: The Capital Group Municipal Income ETF, CGMU.

Chuck Jaffe: CGMU, the Capital Group Municipal Income ETF. Now Todd, one of the things that you’ve been doing with the ETF of the Week is you’ve been bringing in a lot of the big firms that maybe were later to adopt ETFs, but have brought this over. 

Capital Group: big, big player in traditional mutual funds. We haven’t — I don’t think we’ve ever talked about one of their funds as ETF of the Week. Why this fund, from this company, at this time?

Todd Rosenbluth: So, there’s a lot of reasons why. Capital Group entered the ETF marketplace just over three years ago. This ETF, CGMU, just hit its three-year anniversary. It’s done so with strong demand. It’s been a very popular ETF. This is now one of the more popular actively managed municipal bond ETFs. 

And why municipal bonds? Well, people tend to think of them as sleepy and boring. And yeah, we’re doing this around Halloween, but this is something that investors are interested in. We at VettaFi recently held an event where we asked what area of fixed income is most appealing and attractive right now. And munis — municipal bonds — were more popular than investment grade, than high yield, than Treasuries.

Each of those categories — munis was the top one. So, we wanted to dive into CGMU.

Chuck Jaffe: I got to ask, did people give a reason why they were particularly interested in munis right now, as opposed to the other categories?

Todd Rosenbluth: So, we didn’t ask the audience that question, but we asked the panelists that were joining us for this fixed income event to give their take on it. So, let me paraphrase. To quote one of the people that was there with us, “Nobody likes to pay taxes.” And so, munis are always going to be in style, because you get tax-free, at least at certain levels — either the national level, if not the state level of taxes.

Munis are high quality, given the uncertainty of what’s going on. Given that the federal government is shut down, your state government is still operating. And munis are relatively attractive compared to corporate bonds. So, similar bonds that are rated [similarly], munis are actually offering a compelling opportunity for many investors. So, we’ve seen strong adoption to municipal bond ETFs in 2025. In particular, actively managed municipal bond ETFs. And CGMU has gotten a good amount of that money. We’ve seen more investors turn towards Capital Group for their active capabilities in 2025.

Chuck Jaffe: Active ETFs on the bond side, they kind of were what came first. So, there are established competitors. This fund has done very well. It’s been among the leaders in its peer group in its three years of existence. But help people also understand the nuts and bolts, like active management. You’re paying up for it. So, how expensive is this fund?

And presumably, you do think it’s worth it to pay for active management in this space?

Todd Rosenbluth: So, you’ve got a number of questions that are in there. Let me try to capture that. So, yes, the benefits of active management — we’ll come to the cost in a second — the benefits of active management is there’s thousands upon thousands of individual bonds. And so in the index-based approach, you get some representation, but you get the benefits with Capital Group of an experienced team that’s sorting through that universe to find the best opportunities.

The second thing to note, even though Capital Group is relatively conservative in how they’re running their strategy, an active manager has the ability and flexibility to go down out on the credit spectrum, or to go out on the credit spectrum — to say it more succinctly— to find the best return for risk opportunities that’s there. And so, Capital Group has done that.

You also talked about their performance. This fund just hit its three-year track record. It is soon to have a Morningstar star rating. I’m going to assume it’s going to be five-star, because each of the calendar years that this fund has existed, it has been in the top quartile of its peer group, which is great to be able to see.

And specifically to your question, the fee for CGMU is 27 basis points. That’s actually quite cheap for active management. Capital Group is using its scale as an advantage and passing along some of those opportunities and savings to investors. So, you typically would pay more for active management, unless it’s with a large, established asset manager that’s able to shoulder some of those costs themselves.

Did I miss anything?

Chuck Jaffe: No, you didn’t. But there’s one thing that I didn’t ask about, which is as long as we’re talking about a bond ETF, the yield? I mean, what can folks expect on a yield basis from this?

Todd Rosenbluth: So, so that I’m not looking off camera, I believe the tax-free yield is just over 3%. So the tax-equivalent yield — you can do the math on your own to see the benefits of what is available through this diversified approach. And we didn’t touch on the diversification. This is a multi-state strategy.

So you’re going to get exposure to bonds in California and New York, which are the typical large issuers. But you’re going to get representation across other states as well. So I’m living in New York right now. I will still pay… you know, there is still taxes that come from… or these are not tax-free on all of the bonds, because not all of the bonds, or all of the assets are being invested in New York bonds.

Chuck Jaffe: And what that also does — and I’m not answering for you; I just know what your answer is going to be — that also is a reminder that when you’re dealing with any sort of tax-advantaged type of fund, but particularly a muni fund, you want to weigh your options here.

And talk to your tax preparer, because if you’ve got a tax advisor, they might tell you, “Hey, based on where you live, you want to be state-specific in your munis,” or “Maybe you don’t care about it based on where you live,” etc. So, you want to make sure you understand the tax consequences here, because those little bits of money in a bond fund would add up.

Todd Rosenbluth: Yes. And so this has to… it has to matter to you. So, there are New York-specific or California-specific, state-specific municipal bond ETFs that exist. We’ve seen some asset managers bring that to market. This is a multi-state approach. And with any of the strategies that we’re talking about, I am not giving investment advice. I’m highlighting an example of a fund.

You should talk to somebody, or hopefully you are somebody, if you’re an advisor, to be able to make sure that this fits the objectives as intended.

Chuck Jaffe: The other side here is this is an immediate diversifier for anybody who doesn’t have muni bonds in their portfolio. Is there a percentage of the portfolio you would let this get up to be, as you’re managing things and looking at different categories?

Todd Rosenbluth: So, if what you’re looking for is a relatively tax-free — and I go relatively, as we just talked about — then this, CGMU, could be a core part of your fixed income exposure. We are seeing many investors that are combining their core strategy from a taxable and a tax-free standpoint. So, we’ve talked about actively managed core bond strategies and we’ve also talked about index-based ones. So (AGG A-) and (BND A-), those are the ones that come to mind for me from an index-based taxable strategy. This can play nicely. You get active management and the benefits of municipal bonds — the stability. This can be a good part of the core of your fixed income allocation.

Chuck Jaffe: It’s CGMU, the Capital Group Municipal Income ETF, the ETF of the Week from Todd Rosenbluth at VettaFi. Todd, great stuff. Look forward to talking with you again next week!

Todd Rosenbluth: Yeah, my pleasure. And I know we’re doing this around Halloween, so happy Halloween to you and your listeners!

Chuck Jaffe: You know, I give away, Todd, candy — cash or candy on Halloween. Could you give away ETFs or candy?

Todd Rosenbluth: I think people can certainly see this as 27 basis points. This is almost free!

Chuck Jaffe: This is it. This is the candy that people are getting from you — financial candy that people are getting from you on Halloween! That’s it. Great. Todd, we’ll talk to you again next week. 

The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And I am Chuck Jaffe. You can check out my hour-long weekday podcast to find out why I give away cash or candy on Halloween, and a lot more, by going to the MoneyLifeShow.com or by searching for it wherever you find your favorite podcasts.

Now, if you’re searching for more information on ETFs, you want to find out about the ETFs we talk about, if you want to find just your next great ETF for your portfolio, check out VettaFi.com, where they’ve got all the tools you need to help yourself out.

The ETF of the Week is here for you every Thursday. Make sure you don’t miss an episode by following along on your favorite podcast app, and we’ll be back next week with another ETF for you to consider. Until then, happy Halloween and happy investing everybody!

Note: This article was created in part through assistance from AI tools. The content has been thoroughly reviewed and edited by the author.

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