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Tuesday, May 2, 2023

Clients Want a "Good Destination And a Proper Ride"

Reported by Andrew Lusk

At a major asset management firm on the West Coast, an incoming CEO is stressing the importance of putting client desires above all else when perfecting products and services. These remarks come as his firm is expanding into the ETF market.

Michael C. "Mike" Gitlin
Capital Group
Chair of the Fixed Income Management Committee, CEO-Elect
"Stewardship is what we do, we exist for clients," said Mike Gitlin, soon-to-be CEO of Los Angeles, California-based Capital Group [profile]. Gitlin gave his remarks last Thursday, on the last day of the 2023 Morningstar Investment Conference U.S. in Chicago.

Back in March, the CapGroup team won the Morningstar Award for Investing Excellence in the Exemplary Stewardship category. The team has been nominated for the award every year for the past five years.

As a general rule of thumb, Gitlin explained, clients want a "good destination and a proper ride." That means that not only should their earnings be solid, but the path to those earnings should be smooth and professional throughout.

"Advisors told us they wanted active, transparent ETFs that sit at the core of an individual's investment portfolio," Gitlin said of the firm's latest ETF offerings. "When you listen to your clients, usually good things happen — and advisers are using [the ETFs]."

Gitlin noted that internal data suggests 6,500 advisors have used the firm's ETF offerings to date. Capital Group, he acknowledged, works with two percent of the active ETF market. This is lower than the firm's fifteen percent slice of the active mutual fund market, but Gitlin expects the ETF figure to grow. "Over time, I think you'll see our share increase as we launch new services," he added.

Watch for CapGroup to move further into the ETF marketplace. That doesn't mean they're going over to the passive side, Gitlin notes.

"There are a lot of important active investment services that can be delivered from in an ETF vehicle. I think of fixed income as an example, the vast majority of fixed income mutual funds are active."

He continued, "You'll see that map to the ETF space because active tends to be passive in fixed income. So, it's important and it's happening. I think you'll see a scaling of the active industry. I think the pendulum [will] swing a bit back towards the middle as there's more choice available." 

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