Capital Group U.S. Small and Mid Cap ETF CGMM

Capital Group U.S. Small and Mid Cap ETF features experienced investors but an unexceptional approach, earning Above Average People and Average Process ratings.

This exchange-traded fund is a compact version of American Funds U.S. Small and Mid Cap Equity, a mutual fund that employs the firm’s characteristic multimanager approach. Here, three managers apply their own investing styles to US small and mid-caps within individual sleeves of the portfolio. Those sleeves and one research portfolio balance each other to deliver an overall core style with a modest growth tilt. By combining different investing styles, the team aims to reduce volatility across different market environments. The fund’s principal investment officer, Roz Hongsaranagon, oversees capital allocation across the sleeves to ensure stylistic consistency.

The consolidated ETF portfolio consists of 115 stocks, with an average market cap that sits between those of the Russell 2500 and Russell Midcap indexes. The team invests across all 11 sectors, but bottom-up portfolio construction translates to sector weights that diverge meaningfully from both benchmarks.

The strategy draws on equity subsidiary Capital World Investors’ roughly 50-person analyst team, which includes eight US smid specialists. The managers—Hongsaranagon, Andraz Razen, and Taylor Hinshaw—have ample small-cap experience and currently run sleeves of Capital Group’s Smallcap World strategy, which meaningfully overlaps with this US smid offering. A couple of manager changes, including a departure at the beginning of August 2026 that took the management team from four to three, have kept Hongsranagon on her toes as she’s maintained the strategy’s core profile. It’s unclear whether the firm will add a fourth manager or stick with the current three, but finding the right balance of investing styles will be key to delivering the intended core exposure while outperforming the Russell 2500 and Russell Midcap prospectus benchmarks.

Since the fund’s January 2025 inception, its 28.7% cumulative return through Aug. 31, 2026, trailed the Russell 2500 by 5.9 percentage points and was in line with the Midcap index. But it beat the average mid-cap blend Morningstar Category peer by 4.9 percentage points. The fund’s higher market cap and slight growth tilt were headwinds against the Russell 2500 over the trailing 12 months as small-cap value companies rallied.

A new mix of investment approaches needs to prove its salt in US small and mid-caps, warranting an Average Process rating.

This ETF is a condensed version of a similar strategy that the same managers run. It references American Funds U.S. Small and Mid Cap Equity, an institutional fund launched in September 2024 just a few months before this ETF’s January 2025 inception. The portfolio strategy management group trims the 160-180 holdings in that broader portfolio with an eye on liquidity to arrive at a 115-stock portfolio of the highest-conviction names that mirrors the stylistic traits of the original.

The strategy follows Capital Group's divide-and-conquer approach, splitting the portfolio into sleeves that each manager runs independently before drawing on the firm's analyst pool to round out coverage. That framework has worked well for Capital Group's older, larger strategies, but this fund is applying it to a new US small- and mid-cap mandate with only three managers, so it lacks a proven track record.

Consistent US smid-cap exposure and a core style profile are the target characteristics of the portfolio, even as bottom-up stock research drives portfolio construction. New purchases must fall within the market cap ranges of the Russell 2500 and Russell Midcap indexes, and the overall portfolio’s average market cap is limited to 1.5 times that of either benchmark, whichever is higher. The team allows a slight growth tilt as they believe it’ll allow them to better meet their goal of capital appreciation.

The team can let winners ride, and the strategy is a reasonable next stop for names that grow out of Capital Group Smallcap World. Thus, the portfolio will likely lean toward the upper end of its target market-cap range. Several holdings, like DoorDash and Cloudflare, have climbed into large-cap territory. Still, the ETF’s USD 21.4 billion weighted average market cap sits below the Russell Midcap’s USD 25.3 billion. Capital Group must define at least 80% of the portfolio as small and mid-cap given that’s what the name specifies.

The team doesn’t necessarily have to wait for stocks to graduate from Smallcap World. Nearly half the ETF’s assets overlap; they can own their best US-domiciled ideas in both portfolios. Capital Group monitors combined ownership to avoid owning too much of any one company.

Like many other Capital Group funds, the ETF portfolio is relatively flat, with less than 20% of assets in the top 10 holdings. The fund is diversified across sectors, but these exposures are meaningfully different from both prospectus benchmarks. The portfolio’s 24% allocation to the financial sector was over 6 percentage points higher than the Russell 2500 and 9 percentage points above the Russell Midcap as of July 31, 2026. Industrials was the second largest allocation in the portfolio at 18 percentage points. Consistent with its modest growth tilt, measures like price/earnings and price/cash flow ran richer than the indexes.

Experienced portfolio managers and robust analyst support merit an Above Average People rating.

This strategy has already faced a couple of personnel changes over its short history. Still, its three current managers and 50-odd-person analyst team from Capital World Investors, one of Capital Group’s three equity subsidiaries, are more than capable of supporting the strategy. While most of the analysts specialize by sector, the group includes eight US smid-cap generalists. Principal investment officer Roz Hongsaranagon, who helped design the offering, spent years as a small- and mid-cap analyst before moving into portfolio management. Hongsaranagon and fellow portfolio managers Andraz Razen and Taylor Hinshaw also run sleeves of Capital Group’s Smallcap World strategy.

Razen is interested in cyclical stocks and tends to build more concentrated sleeves. He’s even willing to let a single, high-conviction stock dominate his portfolio. His style is generally the most growth-oriented of the three managers. Hinshaw is on the opposite end of the spectrum, preferring to find strong companies with attractive valuations while focusing on downside protection. Hongsaranagon sits in the middle with a slight growth tilt, though she takes a more diversified approach than Razen. Analysts also contribute ideas to a sizable research sleeve within the portfolio. As the principal investment officer of the strategy, Hongsaranagon oversees allocating capital across the different sleeves to balance their investment styles.

Capital Group stands out from the pack as it enhances capabilities around strong core competencies. It earns a High Parent rating.

Since 1931, Capital Group, parent of American Funds, has thoughtfully built out capabilities to become one of the world’s largest asset managers, managing more than USD 3 trillion dollars. Building on the success of its long-term-oriented, multiple-manager system for global equities, the firm has developed robust fixed-income and multi-asset units, each managing more than USD 500 billion. In January 2026, as part of its periodic review of its now five distinct research organizations, Capital Group implemented changes to its equity investment subsidiaries. This exercise resulted in most equity strategies having at least one portfolio manager change, but according to the firm, it better balances each of Capital Group’s three equity groups in terms of investment breadth and helps the firm better align leadership opportunities across the groups. These kinds of shifts have occurred before, with the last coming in 2018.

Capital Group has also turned its attention to some modern opportunities. To address public/private market convergence trends, it launched in April 2025 two semiliquid funds with private market giant KKR. In keeping with its signature portfolio management approach, it splits those funds into multiple sleeves, which are managed independently by distinct managers at each firm. Capital Group plans to deepen this relationship with target-date and model portfolios, as well as public/private equity funds. On the other end of the spectrum, although the firm is firmly dedicated to active management, it has also acknowledged investor preference for passive investing and has thus partnered with indexing stalwarts Vanguard, BlackRock, and Schwab on active/passive models. Capital Group’s proven investment prowess, strong reputation among investors, and scale mean it can be selective with its partnerships.

In addressing another recent trend, since early 2022, the firm has launched more than 25 active exchange-traded funds globally, most of which are distinct, but several are similar to some of its legacy American Funds mutual funds. Unlike some of its peers, though, it has not filed for SEC exemptive relief to offer ETFs as a share class.

That’s a lot of change for such a storied and sizable firm, but Capital Group has a long history of serving investors well.

The ETF delivered a 28.7% cumulative return from its January 2025 inception through Aug. 31, 2026, which was in line with the Russell Midcap Index. The fund beat its average mid-cap blend category peer by 4.9 percentage points. It trailed the Russell 2500, however, by 5.9 percentage points during that period.

Over the trailing year as of Aug. 31, 2026, the fund’s 15.9% return trailed the Russell Midcap Index and average category peer by 2.1 percentage points and 1.1 percentage points, respectively. Its underperformance relative to the Russell 2500 was more extreme: The fund trailed by 9.7 percentage points. Higher market cap and quality tilts mean that the strategy will likely underperform when small caps lead, as was the case over the trailing year.

Companies benefiting from powering the artificial intelligence infrastructure buildout, like Bloom Energy and Generac, were among the largest contributors to the fund’s return. Meanwhile, a couple of missed data storage plays were among the largest detractors to index-relative returns as the meteoric rises of SanDisk and Western Digital boosted the performance of the Russell 2500 index.

Capital Group U.S. Small and Mid Cap ETF's Prospectus Adjusted Expense Ratio is 0.51% per year. It places it in the second-cheapest quintile of the Morningstar US Fund Mid-Cap Blend Category, where the median fee is 0.83% per year. This cost positioning translates into a Medalist Rating Price Score of 1.21, which reflects its relative price positioning within the category. The Price Score ranges from -2.50 (most expensive) to +2.50 (cheapest), with higher scores indicating better cost competitiveness.