Newsroom Less than 4% of Managed Assets in Active Fixed Income Exchange-Traded Funds: Capital Group Survey

  • Survey finds this may be due to a low understanding of the benefits of active fixed income ETFs among financial professionals, including their ability to sit at the core of a portfolio
  • Supply of active fixed income ETFs has been limited until recently, likely driving demand gap between active fixed income mutual funds and active fixed income ETFs


LOS ANGELES, February 13, 2024 — Despite a surge in demand for active exchange-traded funds (ETFs) and outsized demand for active fixed income mutual funds1, financial professionals are allocating less than 4% of assets under management to active fixed income ETFs, a new Capital Group survey shows. This may be due to a lack of understanding about the key benefits of active fixed income ETFs, according to the survey of financial professionals, revealing a critical opportunity to increase awareness and use of active fixed income ETFs.


Financial professionals say they have a limited awareness of the benefits associated with active fixed income ETFs, including their ability to seek consistent returns, sit at the core of a portfolio, and offer low fees.


Holly Framsted, Capital Group’s Head of Global Product Strategy and Development, remarked, “Only 12% of fixed income ETF assets are active, compared to 78% of fixed income mutual fund assets2. As our survey shows, this may be due to the benefits of active fixed income ETFs not being well understood, which is unsurprising when you consider that active fixed income ETFs have only recently become available in the market. It is a supply challenge that has understandably created a knowledge gap."

 

The survey of 400 financial professionals also found:

 

  • Financial professionals from wirehouses are the least likely to say they are familiar with active fixed income ETFs and their benefits. As a result, they allocate the smallest proportion of their assets to active fixed income ETFs;
  • Less than half of financial professionals consider themselves very confident in knowing how to use active fixed income ETFs in client portfolios, whereas more than half (7-in-10) say they are very knowledgeable about active fixed income mutual funds; and
  • Financial professionals ages 30-39 are more likely to consider themselves knowledgeable about active fixed income ETFs than older financial professionals.

 

Framsted adds, “Active fixed income ETFs are liquid and typically easier to trade compared to buying and selling in and out of single bonds. And, in the case of Capital Group’s suite of active fixed income ETFs, are also designed to sit at the core of a portfolio and seek to achieve consistent returns – at a lower cost and with greater tax benefits than some might expect. As awareness of these benefits grows and cash comes off the sidelines in 2024, we think it is a matter of time until the gap between active and passive fixed income ETFs closes. It’s a matter of ‘when’ and not ‘if,’ and financial professionals would do well to be prepared to speak to clients about the role active fixed income ETFs can play in their portfolios.”
 

Since initially launching in February 2022, Capital Group’s suite of 14 active ETFs has become one of the fastest growing in the industry, with more than $20B in assets under management. Capital Group offers six active fixed income ETFs, including:
 

In addition to offering six active fixed income ETFs, Capital Group offers comprehensive resources to address the knowledge gap among financial professionals regarding active fixed income ETFs and their use in investor portfolios versus mutual funds, other ETFs and separately-managed accounts (SMAs). For additional information on Capital Group’s ETF offerings, visit Capital Group’s online ETF hub. 

About Capital Group

 

Capital Group, home of American Funds, has been singularly focused on delivering superior results for long-term investors using high-conviction portfolios, rigorous research, and individual accountability since 1931.

 

As of December 31, 2023, Capital Group manages more than $2.5 trillion in equity and fixed income assets for millions of individuals and institutional investors around the world. Capital Group manages equity assets through three investment groups. These groups make investment and proxy voting decisions independently. Fixed income investment professionals provide fixed income research and investment management across the Capital organization; however, for securities with equity characteristics, they act solely on behalf of one of the three equity investment groups.

 

For more information, visit capitalgroup.com.

1 The Cerulli Report: U.S. Exchange-Traded Fund Markets 2023; Morningstar Direct Asset Flows for US Open-End & ETF ex Money market ex Fund-of-Funds ex Feeder, include obsolete funds, as of December 31, 2023
2 Morningstar Direct Asset Flows for US Open-End & ETF ex Money market ex Fund-of-Funds ex Feeder, include obsolete funds, as of December 31, 2023

 

Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
 

Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectuses and summary prospectuses, which can be obtained from a financial professional and should be read carefully before investing.
 

Capital Group exchange-traded funds (ETFs) are actively managed and do not seek to replicate a specific index. ETFs are bought and sold through an exchange at the then current market price, not net asset value (NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV when traded on an exchange. Brokerage commissions will reduce returns. There can be no guarantee that an active market for ETFs will develop or be maintained, or that the ETF’s listing will continue or remain unchanged.
 

As nondiversified funds, Capital Group ETFs have the ability to invest a larger percentage of assets in securities of individual issuers than a diversified fund. As a result, a single issuer could adversely affect a fund’s results more than if the fund invested a smaller percentage of assets in securities of that issuer. See the applicable prospectus for details.
 

For CGCB, CGSM, CGSD, CGMU, CGCP and CGMS, the return of principal for bond funds and for funds with significant underlying bond holdings is not guaranteed. Fund shares are subject to the same interest rate, inflation and credit risks associated with the underlying bond holdings.
 

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Statements attributed to an individual represent the opinions of that individual as of the date published and do not necessarily reflect the opinions of Capital Group or its affiliates. This information is intended to highlight issues and should not be considered advice, an endorsement, or a recommendation.
 

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