In a span of just four years, The Capital Group Companies went from ETF rookie to perennial All-Star. The Los Angeles-based firm has already amassed over $120 billion in assets dispersed across its suite of 25 active ETFs. TMX VettaFi caught up with Scott Davis, head of ETFs at Capital Group, to discuss how the firm grew its ETF assets so quickly.
The pace of its growth wasn’t accidental. Capital Group already had an investment culture forged by 95 years of asset management experience, which includes an expansive offering of mutual fund products. It took that same heritage and reshaped it into a modern investment vehicle — the ETF. Davis noted that Capital Group’s success was and is driven by a simple mandate: Provide the “core building blocks” for advisors, prioritizing the tenets of transparency, active management, and long-term research.
Meeting Advisor Demand
20 out of the 25 funds in Capital Group’s ETF suite already exceed $1 billion in assets, highlighting its rapid rise. In an ETF marketplace that became fiercely competitive the last five years, this level of growth is astounding.
Part of the success stems from a structural shift in how advisors construct portfolios. Historically, advisors looking to tap into Capital Group’s seasoned investment process were restricted to its mutual fund or SMA offerings. Advisors seeking the tax efficiency and liquidity of an ETF were often forced into passive index products. That all changed when the firm introduced its six inaugural active ETFs to the marketplace in 2022. However, the goal wasn’t to supplant mutual funds. Rather, Capital Group sought to provide optionality for RIAs and tax-sensitive investors who were leaning more heavily towards ETFs.
“I think a lot of those folks would prefer to have our investment process, and so now that we offer the ETF and all the benefits of it, they’re now there,” Davis explained.
The Capital System
When visiting the firm’s product website for their ETFs, the messaging is clear: “Not all active management is created equal.” That’s indeed the case regarding the firm’s “Capital System.”
The firm truly encapsulates the concept of team over individual — Capital Group doesn’t rely on a single “star manager.” Rather, the firm divides each portfolio into sleeves managed by different portfolio managers. Additionally, they are backed by a dedicated research team managed by career analysts.
Again, as the ETF product site states, Capital Group is “truly active.” This means that they employ a boots-on-the-ground approach that involves exhaustive research efforts. Davis noted that last year alone, the firm conducted over 21,000 meetings with companies from all parts of the globe.
“We are having conversations, fundamental research, looking at supply chains, competitors… anything that can really help us understand the business prospects for a company,” Davis noted. He added that this collaborative effort ensures that “diverse perspectives and fundamental research” in every investment opportunity.
Key Themes and Standout Funds
Among the roster of 25 funds, there were certain ETFs discussed at Exchange (though all should be given close consideration). For those looking beyond the S&P 500 as valuations in mega-caps appear stretched and index concentration in Magnificent Seven names still dominate the market, here are other opportunities to consider:
- Capital Group Dividend Value ETF (CGDV ): With just over $29 billion in assets as of March 20, this fund targets high-quality large-cap companies with a dividend yield significantly higher than the S&P 500. Davis noted that “CGDV… [is] being actively used to replace or complement index exposure because people want that diversification.”
- U.S. Small-Mid Cap ETF (CGUS ): Again, as large-cap valuations become suspect, more investors are turning to small- and midcap opportunities. The fund focuses on smaller domestic companies with the potential to become the “next acorn to oak story,” Davis said.
More investors are increasingly adding additional diversification by looking beyond U.S. borders. However, Davis noted that the ideal way to get exposure is via an active fund. Active managers can deftly navigate geopolitical risks.
- Capital Group New Geography ETF (CGNG ): Inspired by the firm’s legendary New World mutual fund, CGNG doesn’t hold a geographical bias. Instead, the fund looks at where companies do business as opposed to where they are domiciled. Davis said CGNG looks “at companies and where they do business… They might get their mail elsewhere, but they derive their revenue from emerging markets.”
In a higher-for-longer rate environment, navigating fixed income requires the active expertise of those who know the market the best. Davis noted that passive fixed-income indexing could be a potential trap. It exposes investors to the largest and often the most indebted issuers. That said, the active approach inherent in these funds is warranted:
- Core Plus Fixed Income ETF (CGCP ): This fund serves as a “one-stop shop” that can actively manage credit risk, duration, and curve positioning.
- Capital Group Municipal Income ETF (CGMU ): This fund is a top-quartile performer that Davis notes has grown its assets quickly with investors seeking active expertise in the complex and nuanced muni market.
The Path Through 2026 and Beyond
As the first quarter of 2026 comes to a close, Davis is looking at the future. This includes the potential growth of multi-asset ETFs. In particular, the firm’s Capital Group Balanced ETF (CGBL ) mimics the successful mix of equities and fixed income strategy inherent in their American Balanced Fund.
“Not a concept that’s been very popular in ETFs, but something that we have a lot of experience from… there’s a lot of tax efficiency embedded in that,” Davis said of CGBL.
As mentioned, in a more competitive ETF marketplace, it’s becoming difficult for providers to differentiate themselves among the masses. Regarding value proposition that speaks to investors, advisors, and gatekeepers, Davis quickly identified this about Capital Group: The firm combines low-cost structures with a global research footprint in their active ETFs.
“We are delivering active management, which we ultimately want to do better than what [investors] could get through an index fund,” Davis said.
Capital Group isn’t just another participant in the ETF market. The firm is helping to redefine the core of the modern investor’s portfolio. Meanwhile, it continues to maintain the investment principles it’s built over the last 95 years.
Click here for a complete list of active ETFs from Capital Group.
For more news, information, and strategy, visit ETFdb.
