Capital Group | Best Capital Markets Team
Scott Szever, head of ETF Capital Markets, Capital Group writes on their win in the ETF Express US awards 2022.
Why do you think you won this award?
At Capital Group we have a client-first mindset; everything we do is with the end-investor in mind and how we can help to meet their needs and successfully achieve their financial goals.
We designed our initial suite of actively-managed, transparent ETF strategies to serve as core building blocks in an investor’s portfolio – something we’d heard from advisers and investors alike that they wanted. Active ETFs have, until now, been an underserved part of the market. We think our success owes to meeting that demand and bringing the same investment process and track record of superior results over the long-term we’re known for across our mutual funds to the ETF vehicle.
In fact, we’ve just surpassed USD4 billion in AUM in our ETF strategies, making them one of the fastest-growing suite of active ETFs ever in the market considering we only launched our debut strategies this past February.
What is the size and scale of your business currently?
To date since we have launched a total of nine actively-managed, transparent ETF strategies including five equity strategies and four fixed income strategies. These all span the major equity and fixed income categories.
Since our February 2022 launch we have seen AUM grow to over USD4 billion as of early November, with Capital Group’s ETFs representing close to 6 per cent of total year to date flows into active ETFs. Across all ETFs – active and passive strategies – Capital Group’s flows have ranked 15th best to date. This makes us one of the fastest-growing active suite of ETFs in the market. We’re incredibly proud, while this also validates that we are meeting an unmet need in the market for actively managed ETF strategies that can sit at the core of a portfolio.
What trends have you seen over the past year?
In spite of this year’s volatile markets and substantial losses across both equities and fixed income, ETF flows have been broadly resilient, underlying the trend of ETF adoption. In fact, ETFs are on pace for their second-best year ever at over half a trillion dollars in total flows, behind last year’s record haul of USD900 billion.
Not unsurprisingly, thematic and more niche strategies have seen flows slow or drop sharply as this year’s market conditions made many investors reassess investments at the core of their portfolios. We think this is another reason our active ETF strategies have done well in this market environment, given they were designed as core building blocks for a portfolio.
This is part of a larger overall trend that has seen active ETFs continue to attract and gain a greater share of flows. ETFs have for a long time been synonymous with passive, and now investors are more aware of other choices available to them in the ETF investment vehicle.
Where do you see the ETF industry going in terms of products over the coming year?
We believe the opportunity for active-managed ETFs is still very significant and that we can make a meaningful impact in the space. Our view is that investment managers will continue to bring active ETFs to market and at a relatively fast pace – consider, for example, that 60 per cent or more of all new listings over the past two years have been active strategies. This is even more true when we look at fixed income ETFs. We think we will see a lot of development and launches in that space.
We think the use of ETFs in other investment solutions is also very likely to grow. We have plans to include our ETF strategies in portfolio models, for example, and think this represents another unmet but significant market opportunity.
Although our ETF strategies are net new strategies and we do not have plans to convert any of our existing investment solutions into ETFs, elsewhere in the industry we would not be surprised to see more mutual fund conversions to ETFs.