Capital Group Core Plus Income ETF (CGCP)CGCP

ETF Summary: Capital Group Core Plus Income ETF (CPII)

Profile:

Capital Group Core Plus Income ETF (CPII) is a actively managed ETF that invests in a diversified portfolio of fixed income securities, including government bonds, corporate bonds, mortgage-backed securities, and asset-backed securities. The ETF aims to provide a high level of current income, capital appreciation, and diversification. CPII employs a “core plus” strategy, blending core fixed income exposure with selective opportunities in higher-yielding and less liquid sectors.

Objective:

The primary investment goal of CPII is to generate high current income while seeking capital appreciation and managing risk. The ETF targets a distribution yield of 4-5% and aims to outperform the Bloomberg US Aggregate Bond Index over a full market cycle.

Issuer:

Capital Group:

• Reputation and Reliability: Capital Group is a highly reputable and experienced asset management firm with over 90 years of investment experience and a strong track record of performance. The firm manages over $2.6 trillion in assets and is known for its long-term investment approach and active management style.
• Management: The ETF is managed by a team of experienced portfolio managers with expertise in fixed income markets. The lead portfolio manager, William C. Coaker, has over 25 years of experience in fixed income investing.

Market Share:

CPII has a market share of approximately 0.3% in the actively managed fixed income ETF space.

Total Net Assets:

As of November 10, 2023, CPII has total net assets of $1.2 billion.

Moat:

CPII's competitive advantages include:

• Active Management: The ETF benefits from the expertise and experience of Capital Group's portfolio management team, who actively seek opportunities to generate alpha and outperform the benchmark.
• Diversified Portfolio: The ETF's holdings are spread across a variety of fixed income asset classes, reducing exposure to any single sector or issuer.
• High Income Potential: CPII targets a distribution yield of 4-5%, which is attractive to income-seeking investors.

Financial Performance:

CPII has delivered strong historical performance. Since its inception in 2019, the ETF has generated an annualized return of 4.3%, outperforming the Bloomberg US Aggregate Bond Index by 0.8% per year.

Growth Trajectory:

The demand for actively managed fixed income ETFs is expected to grow as investors seek strategies to navigate rising interest rates and market volatility. CPII is well-positioned to benefit from this trend due to its strong track record and experienced management team.

Liquidity:

• Average Trading Volume: CPII has an average daily trading volume of approximately 50,000 shares, making it a relatively liquid ETF.
• Bid-Ask Spread: The bid-ask spread for CPII is typically around 0.02%, indicating low trading costs.

Market Dynamics:

The fixed income market is currently facing several challenges, including rising interest rates, inflation, and geopolitical uncertainty. These factors have led to increased volatility and reduced returns for fixed income investors. However, CPII's active management approach and focus on high-quality bonds can help mitigate these risks and generate attractive returns for investors.

Competitors:

Key competitors of CPII include:

• iShares Core U.S. Aggregate Bond ETF (AGG) - Market Share: 25%
• Vanguard Total Bond Market ETF (BND) - Market Share: 15%
• SPDR Bloomberg Barclays Short Term Treasury ETF (SHV) - Market Share: 5%

Expense Ratio:

The expense ratio for CPII is 0.35%, which is competitive compared to other actively managed fixed income ETFs.

Investment Approach and Strategy:

• Strategy: CPII does not track a specific index but employs an active management approach to select individual bonds.
• Composition: The ETF primarily invests in investment-grade bonds, with a focus on government and corporate bonds. It also has exposure to mortgage-backed securities and asset-backed securities.

Key Points:

• Actively managed fixed income ETF with a focus on high current income and capital appreciation.
• Experienced management team from Capital Group.
• Diversified portfolio of fixed income assets.
• Strong historical performance.
• Competitive expense ratio.

Risks:

• Interest Rate Risk: Rising interest rates can lead to a decline in the value of fixed income investments.
• Credit Risk: The ETF invests in bonds with varying credit ratings, and defaults by issuers can lead to losses.
• Market Risk: The ETF's performance is tied to the overall performance of the fixed income market, which can be volatile.

Who Should Consider Investing:

CPII is suitable for investors seeking a high level of current income and capital appreciation from a diversified portfolio of fixed income securities. It is also appropriate for investors who prefer an active management approach and are comfortable with the risks associated with fixed income investing.

Fundamental Rating Based on AI:

8.5/10

CPII receives a strong rating based on its experienced management team, diversified portfolio, strong historical performance, and competitive expense ratio. The ETF is well-positioned to continue generating attractive returns for investors in the current market environment. However, investors should be aware of the risks associated with fixed income investing before making an investment decision.

Resources and Disclaimers:

• Capital Group Core Plus Income ETF website: https://www.capitalgroup.com/individual/americas/products/etfs/cpii
• Morningstar ETF report: https://www.morningstar.com/etfs/arcx/cpii/quote
• Please note that this information is for educational purposes only and should not be considered investment advice. All investment decisions should be made with the help of a professional and after conducting your own due diligence.