A strong management team and sound investment process underpin Capital Group Short Dur Muncpl Inc ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy’s management team earns a High People Pillar rating. The strategy's investment approach stands out and earns a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in A rated bonds and debt with 10- to 15-year maturities compared with category peers. The strategy's parent organization earns the firm a High Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

Morningstar's style-agnostic investment process evaluation looks for strategies that should be able to outperform their Morningstar Category index on a risk-adjusted basis over time. Capital Group Short Dur Muncpl Inc ETF earns a High Process Pillar rating.    The leading factor in the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 3.6 stars. The parent firm's five-year risk-adjusted success ratio of 65% also supports the rating. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. Their noteworthy success ratio suggests that the firm does well for investors and that this fund may benefit from that. The firm's five-year retention rate of 86% contributes to the process as well.

 Compared with other funds in the Muni National Short Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Relative to the category average, the managers have been significantly underweight A rated bonds in recent years. In the latest month, the strategy has also relatively underweighted A rated bonds compared with Morningstar Category peers. Additionally, there's been a notable bias away from debt with 10- to 15-year maturities over the past few years. Similarly, in recent months, the strategy also had less exposure to debt with 10- to 15-year maturities than peers. Finally, during the past few years, the fund leaned away from corporate debt. Nevertheless, the fund's corporate bonds exposure was in line with peers in the latest month.

  The portfolio has a lower average credit rating of BBB, compared with the typical peers' A and 2% of the fund's assets are rated non-investment-grade, compared to its peers' 1%. Lower quality bonds have higher yields but come with more risk.

High

Process

Capital Group Short Dur Muncpl Inc ETF earns a High People Pillar rating. Mark Marinella, the longest-tenured manager, has seven years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 2.9 stars, demonstrating disappointing risk-adjusted performance compared with category peers. The team is small but adequately equipped, with only one other supporting manager. Together, the two listed managers have five years of average listed portfolio management experience. As a team, they manage three investment vehicles together, with solid long-term prospects. The strategies average a Silver asset-weighted Morningstar Medalist Rating, indicating a position to deliver positive alpha in aggregate. The highest personal investment in the fund by any of its managers is between $100,000 and $500,000. That's on the low side--it would need to be more than $1 million for us to see the investment as sufficient to promote the strong alignment of their interests with the strategy's investors. 

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

People

Capital Group’s adaptability while staying true to its identity maintains its High Parent rating.
The firm is under a new but familiar kind of leadership. Mike Gitlin, previously the head of fixed income and global trading, took over as CEO in October 2023. He replaced Tim Armour, who had been chairman and CEO since 2015. Rob Lovelace, the firm’s vice chair and president, also stepped off the management committee to pave the way for new leadership. Martin Romo and Jody Jonsson, who both head up an investment subsidiary, became chairman and CIO, and vice chair, respectively. Romo, Jonsson, and Lovelace retain their roles as principal investment officer on funds. The transition demonstrated a considered succession plan and a commitment to keeping the leadership team-oriented and investor-heavy.
Meanwhile, the firm has been thoughtful about other changes. Recognizing investor preferences, Capital since early 2022 has launched 14 exchange-traded funds—seven equity, six fixed income, and one allocation. The new funds, branded under the Capital Group name, are distinct from but rhyme with some of the legacy American Funds mutual funds. The firm also launched active-passive models with industry peers that leverage its mutual fund lineup. All these new investment options employ Capital’s time-tested investment philosophy, use its hallmark multimanager system, and draw from its huge pool of seasoned investors.

Parent

Capital Group Short Duration Municipal Income ETF

CGSM actively manages a portfolio of US municipal bonds exempt from regular federal income tax. The portfolio is mostly comprised of investment grade debts and the average portfolio duration is expected to be one year.

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Capital Group has launched five active exchange traded funds (ETFs) today on the New York Stock Exchange. Among the new funds is the firm's first multi-asset ETF, along with two fixed income and two equity ETFs.

Capital Group Lists 5 New Active ETFs

LOS ANGELES, Sept. 28, 2023 /PRNewswire/ -- Capital Group launched five active exchange-traded funds (ETFs) today on the New York Stock Exchange. This compelling lineup includes its first-ever multi-asset ETF, along with two fixed income and two equity ETFs, significantly augmenting Capital Group's existing selection of active ETFs to a total of 14.

News for Capital Group Short Duration Municipal Income ETF ETF (CGSM)