Capital Group Core Plus Income ETF

CGCP

Market cap $5.78B

Capital Group Core Plus Income ETF offers a high 5% yield and monthly distributions, making it attractive for income-focused investors seeking portfolio diversification and lower equity correlation. The fund's price has been suppressed by high interest rates, but future rate cuts could serve as a catalyst for price appreciation and total return. CGCP's portfolio is mostly investment-grade debt, with limited default risk and no leverage, supporting its resilience in uncertain markets.

Capital Group Core Plus Income ETF offers a 5% yield from a diversified, low-risk debt securities portfolio with a 0.34% expense ratio. The CGCP ETF has outperformed the total bond market since inception but experienced an 11.9% price decline, losing 23% in inflation-adjusted value. Compared to competitors, CGCP has one of the lowest expense ratios and average performance and risk metrics, with JCPB and TOTL marginally better.

An actively managed fund hitting its three year track record used to be a major milestone. A Morningstar rating would follow.

Advisors and investors have long turned to active management for fixed income exposure. They are increasingly favoring ETFs to access the markets.

Investors are shifting from covered call equity strategies to traditional fixed-income assets, making the Capital Group Core Plus Income ETF a compelling option. The fund diversifies across government debt, agency bonds, corporate bonds, mortgage-backed securities, and emerging market debt, with a significant U.S. focus. Compared to AGG and BND, CGCP offers higher yields and flexibility through opportunistic investments in high-yield bonds and non-U.S. dollar markets.

Actively managed ETFs continued to gain traction in July with $24 billion of net inflows. This represented 19% of the industry's net inflows, which remains impressive given the 7% share of the assets.

Capital Group first launched ETFs less than two and a half years ago, but is not slowing down. The firm's asset base is just under $35 billion, aided by nearly $10 billion thus far in 2024.

Interest in active fixed income products has swelled in 2024, as credit spreads narrow and the Federal Reserve holds fast to a “will they, won't they” game of trimming interest rates. Active fixed income ETFs have seen north of $11 billion in net inflows this year and $27 billion globally.

A changing interest rate narrative prompted many advisors and investors to reevaluate their bond exposures this month. Asset managers stepped in to offer their perspectives on the changing market dynamics and where the risks and opportunities lie in the 2024 Fixed Income Symposium hosted by VettaFi.

It's no secret that actively managed fixed income products are having a moment. With an unusual rate environment and a hard-to-read Fed, demand for active fixed income products has surged.