The popular belief that exchange-traded funds are primarily passive vehicles will change as more active ETFs become available, said Michael C. Gitlin, incoming president and CEO of Capital Group, in a keynote event at the Morningstar Investment Conference in Chicago on Thursday.
Mr. Gitlin, currently a partner at Capital Fixed Income Investors and chairman of the firm's fixed-income management committee who will take on his new role in October, said that while ETFs have long been perceived as passive, "There are a lot of important active investment services that can be delivered in an ETF vehicle."
Capital Group announced in SEC filings earlier this month that it plans to offer three new actively managed products, including the Capital Group Core Balanced ETF, its first balanced ETF. The firm launched its first six ETFs in February 2022 and currently offers nine actively managed, transparent ETFs, which as of early April had assets under management totaling slightly more than $8 billion.
Mr. Gitlin on Thursday said, "We didn't clone our American Funds as ETFs. We launched new investment services, so I would think of them as complementary (to mutual funds)."
He also noted that the firm will remain focused on mutual funds.
"It's the nature of our client base, really," Mr. Gitlin said. "If you look at it, we have a tremendous client base in retirement where mutual funds are still the preferred vehicle. Mutual funds are still going to be very, very important and that's why we maintain them."
Within fixed income, he noted that while just as with other asset classes, there are far more passive ETFs available in the market than active ones, "active ETFs will take the majority of the shares over time, just as it (active) has in mutual funds."
"I think choice is important," Mr. Gitlin said, "so if you've seen the profile ratio of ETFs, SMAs (separately managed accounts), CITs (collective investment trusts), it's all about choice. Mutual funds aren't going away. They're just going to have company."
