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Capital Group Core Plus Income ETF (CGCP) Unveiling the Capital Group Core Plus Income ETF (CGCP)

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On a recent installment of the “ETF of the Week” podcast, VettaFi’s Head of Research Todd Rosenbluth conversed with Chuck Jaffe of “Money Life” to dissect the characteristics and inner workings of the Capital Group Core Plus Income ETF (CGCP). The comprehensive discussion aimed to furnish investors with a profound comprehension of the ETF’s overall strategy and performance metrics.

Delving into the Fund

Chuck Jaffe: One fund on point for today. The experts talk about it. Welcome to the ETF of the Week, an in-depth exploration of noteworthy, distinctive, and captivating exchange traded funds with the specialists at VettaFi.com. Equipped with a suite of research tools, VettaFi empowers investors with the knowledge required to navigate the world of ETFs astutely. Todd Rosenbluth, the head of research at VettaFi, provides insights into the fund.

Todd Rosenbluth: Good to be with you again, Chuck. Thanks.

Chuck Jaffe: Your ETF of the Week is … ?

Todd Rosenbluth: The Capital Group Core Plus Income ETF (CGCP).

Chuck Jaffe: This is an interesting bond fund. Intermediate bonds. Now, that’s an interesting discussion to have at this point in the yield curve discussion by itself. But is there more to it than that?

Todd Rosenbluth: As you mentioned, this is an actively managed intermediate bond fund that can take on some additional credit risk. That’s the plus income part of it. So this fund has roughly 10% to 15% exposure to noninvestment-grade bonds. The fund is yielding at 5.5%. It’s relatively cheap for an actively managed bond fund because Capital Group is using its scale to its advantage.

Capital Group’s Foray into ETFs

Chuck Jaffe: Now, it’s also active management from Capital Group, longtime veteran fund managers, not that experienced on the ETF side. But this fund’s almost $2 billion, and it hasn’t been around very long. So obviously they’ve got some juice here. But how do you generally like their ETF offerings?

Todd Rosenbluth: So Capital Group came to market just over two years ago and they launched their first products. They’ve been very successful; $20 billion overall. Now, many people are familiar with Capital Group as the firm behind the American Funds Mutual Funds Suite. So they’ve got equity in fixed income products. They’ve got a depth in their research team to be able to support their equity in fixed income products.

And I think that’s coming to bear within this relatively new active fixed income ETF. This is not a two-year-old management team. These are people who’ve worked together in some capacity of Capital Group and are now part of this ETF, and they’re certainly demonstrating their success.

Navigating Credit Risk and Yield

Chuck Jaffe: You talked about what this fund gets into, and at VettaFi what you guys do, and what you particularly have always done in your career is try to look at holdings. And so it’s interesting to me that here you’re talking about the yield on a fund that puts a piece of its portfolio into, unrated, unregistered, junky-ish securities at this point in the scale.

Todd Rosenbluth: We think more advisors, and more investors are willing to take on credit risk in 2024, given where we are in the Fed cycle. The Fed is likely to be cutting interest rates probably by the middle of 2024. And now it feels like taking on credit risk is being rewarded. So we like the fact that this active management team has the ability to do so in BB or B-rated or some unrated bonds, but yet it still has its core within the investment-grade universe.

Benefits of Active Management

Chuck Jaffe: Obviously, a lot of investors already have some measure of a bond fund. Why would you want to add this? What are you hoping this is going to do? And if you’ve got something that covers the intermediate space, do you look at making a change to this fund?

Todd Rosenbluth: So, for many ETF-oriented investors, for their fixed income exposure, their bond exposure is in something that’s passively managed tied to the Bloomberg Agg Index, whether it’s an iShares or Vanguard product or others. This is active management. People believe in active management. This is a fund for somebody who believes in active management, wants the ETF structure, and wants it to come from a firm with a proven track record like Capital Group.

Conclusion

Chuck Jaffe: The ETF of the Week is a joint production of VettaFi and Money Life with Chuck Jaffe. And I’m Chuck Jaffe. You can learn all about my hour-long weekday podcast by going to  MoneyLifeShow.com or by searching wherever you find great podcasts. And if you’re searching for more information on investing in exchange-traded funds, be sure to check out VettaFi.com.

It’s a great site, with plenty of tools to help you out. They are on Twitter @Vetta_Fi. Todd Rosenbluth is their head of research, and my guest. He’s on Twitter too, at @ToddRosenbluth. ETF of the Week is here for you every Thursday. Don’t miss one, by following along with your favorite podcast. We’ll see you next week. Until then.

For more news, information, and analysis, visit VettaFi | ETF Trends.