Capital Group U.S. Multi-Sector Income ETF CGMS

Capital Group U.S. Multi-Sector Income ETF is an appealing option for investors who want a strategy that majors on US corporate credit.

The approach here combines specialist insights with team collaboration in service of an income-oriented, credit-heavy mandate that is otherwise flexible. Indeed, its portfolio blends to varying degrees high-yield bonds, investment-grade corporates, securitized credit, and emerging-markets corporate debt, while leaving room for opportunistic allocations to other parts of the market if they become attractive.

The exchange-traded fund’s five-person management team includes two high-yield bond managers, an investment-grade corporate specialist, a securitized credit authority, and generalist Damien McCann. Their collective expertise helps differentiate the strategy from its customized benchmark, weighted 50% in the Bloomberg US Corporate High Yield 2% Issuer Capped, 30% in the Bloomberg US Corporate, and 20% in a combination of the Bloomberg CMBS Ex-AAA and Bloomberg ABS Ex-AAA Indexes. Although an allocation to the JPMorgan Corporate Emerging Markets Bond Index or the like is not included in that benchmark, McCann typically uses his discretion as the principal investment officer to populate this ETF’s portfolio with the emerging-markets corporate picks of Robert Burgess, who is the only named manager of mutual fund sibling American Funds Multi-Sector Income not also on this ETF’s roster.

The ETF’s corporate credit leanings are apparent relative to its multisector bond Morningstar Category peers. The combined weighting of high-yield bonds and investment-grade corporates, including the impact of credit derivatives, has typically ranged from about 65% to 75% since the ETF’s October 2022 inception, versus 35% to 45% for the peer median.

Even though the ETF can and does buy protection through index-level credit default swaps, its credit-heavy portfolio is nonetheless prone to struggle in spread-widening environments, as in early 2025. Amid heightened tariff concerns between Jan. 22 and April 7, 2025, high-yield bond spreads widened more than 200 basis points as relevant Treasury yields declined around 50 basis points. Over that period, the fund’s 1.66% loss placed it in the bottom decile versus distinct peers.

The ETF, though, has a competitive record, thanks to its ability to take advantage of opportunities through a market cycle. It rebounded with top-quintile results for the rest of 2025, for example, and through August 2026, had a top-quintile showing versus distinct category peers since its October 2022 debut.

The ETF merits an Above Average Process Pillar rating.

Its income-oriented, credit-heavy approach blends, to varying degrees, US high-yield bonds, US investment-grade corporates, securitized credit, and emerging-markets corporate debt, while leaving room for opportunistic allocations to other parts of the market if they become attractive. The strategy gauges itself against a customized benchmark, weighted 50% in the Bloomberg US Corporate High Yield 2% Issuer Capped, 30% in the Bloomberg US Corporate, and 20% in a combination of the Bloomberg CMBS Ex-AAA and Bloomberg ABS Ex-AAA Indexes. Although an allocation to the JP Morgan Corporate Emerging Markets Bond Index or the like is not included in that benchmark, Damien McCann typically uses his discretion as the principal investment officer to populate this ETF’s portfolio with the emerging-markets corporate picks of Robert Burgess, who is the only named manager of mutual fund sibling American Funds Multi-Sector Income not also on this ETF’s roster.

While good bond-picking through a market cycle is a priority here, the strategy aims to take advantage of bond sector-level mean reversion in credit spreads. The team will tilt the portfolio toward high-yield bonds, for example, when their spreads widen relative to historic norms and tilt away from them when their spreads narrow, often through index-level credit default swaps.

The portfolio’s interest rate sensitivity as measured by duration can vary from its customized benchmark’s duration by up to 2.0 years, but in practice, the team has kept the portfolio’s duration within 1.0 year. Since its October 2022 inception, the portfolio’s duration has ranged from roughly 4.0 to 5.0 years, versus about 4.0 to 4.5 years for the multisector bond category median over the same period.

The portfolio leans massively toward US corporate credit. The combined weighting of high-yield bonds and investment-grade corporates, including the impact of credit derivatives, has typically ranged from about 65% to 75% throughout the ETF’s history. In fact, even at its since-inception low of 64.4% at year-end 2024, the portfolio’s total high-yield and investment-grade corporate stake was still then one of the multisector bond category’s highest.

True to its flexibility within the confines of a credit-heavy approach, portfolio exposures can shift dramatically along with spreads. In October 2023, the ETF sold protection through index-level credit default swaps to add about 4 percentage points of exposure as high-yield-bond spreads widened beyond 450 basis points and closed that position by the end of the year as spreads contracted more than 100 basis points.

Amid changing spreads, the ETF’s north star remains its customized benchmark. The June 2026 portfolio was 7.1 percentage points light in high-yield exposure versus this benchmark and about 2.6 percentage points overweight in investment-grade corporates, thanks largely to a preference for BBB rated bonds over BB bonds. In the securitized portion of the portfolio, the ETF favored asset-backed securities over commercial mortgage-backed securities.

The portfolio’s consistently most distinctive weighting versus its benchmark is a 2% to 5% allocation to emerging-markets corporate bonds, which on average has been split about one-third and two-thirds between investment-grade and high-yield corporates. The June 2026 portfolio had a 2.5% emerging markets bond weighting, about three-fourths of which was in junk-rated debt.

The ETF takes more credit risk than most rivals. Between its October 2022 inception and mid-2026, the strategy has on average allocated about 52% and 40% of its assets, respectively, to investment-grade rated and below-investment-grade rated debt, with another 6% or so in unrated debt and the balance of the rest in cash. That’s several percentage points more combined junk bond and unrated exposure than the roughly 33% norm for the multisector bond category over that period.

Defaults can and do occur within the portfolio, though individual positions in defaulted companies tend to be modest. Entering 2025, for example, the US mutual fund has about 16 and 4 basis points of exposure, respectively, to the US-dollar-denominated bonds of the Brazilian petrochemicals business Braskem and the Brazilian energy company Raízen. Raízen defaulted on its debt in March 2026 and Braskem in June 2026. Both companies are now negotiating with creditors like Capital Group in the courts, as their debt trades at around half its face value.

Capital Group’s multimanager system helps to handle the roughly USD 35 billion in combined assets in this ETF and its US-focused multisector fixed-income strategy sibling. The ETF receives an Above People Pillar rating because of that system’s strengths as well as the investment team’s ability, experience, and fund ownership.

Although the ETF’s portfolio is not split into separately run sleeves, the essence of the multimanager system is in effect here. Principal Investment Officer Damien McCann, high-yield managers Shannon Ward and Sandro Lazzarini, investment-grade corporate specialist Scott Sykes, and securitized debt authority Xavier Goss draw on their respective expertise to guide security selection and sector positioning. In adjusting portfolio exposures, the team, whenever possible, uses in-kind exchanges within customized creation-redemption baskets, which limit transaction costs and are more tax-efficient. Structured products like asset-backed securities are an exception because the ETF market infrastructure still requires cash trading when buying or selling these securities.

Each manager has extensive experience. Lazzarini, the relative industry newcomer, already had around eight years of experience when he joined Capital Group in 2015. Ward, the most experienced manager, started in the industry in the 1990s and joined Capital Group in 2017. McCann is a homegrown talent who started in the industry and at the firm in 2000. Sykes had around four years of experience when he joined Capital Group in 2005, and Goss started at BlackRock in 2003 before coming to Capital Group in early 2021.

The ETF draws on a deep bench of veteran analysts. As of mid-2026, Capital Group’s nearly 60 fixed-income analysts had, on average, been with the firm for about 7.5 years and in the industry for about twice that time. Since the multisector fixed-income strategy does not have an analyst-led research portfolio as one of its sleeves, the managers here look to the research portfolio of other strategies that an analyst bond-picks and the sizing of those picks, such as the US mutual fund American Funds American High-Income Trust for high yield.

Alignment with investors through manager ownership is significant. McCann invests at least USD 2 million combined in the ETF and sibling strategy; Ward, Lazzarini, Sykes, and Goss each have at least USD 200,000 together in the two.

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 has a strong record. Since its October 2022 launch, its 8.29% annualized gain through August 2026 beat the Morningstar Category index, the Bloomberg US Universal benchmark, by 3.23 percentage points and ranked in the top quintile of nearly 100 distinct multisector bond peers measured by their cheapest share class. Volatility-adjusted results were also competitive as its information ratio versus the Bloomberg U.S. Universal (a risk-adjusted measure of excess return relative to excess standard deviation) placed in the category’s best quintile, too.

Consistency relative to its multisector bond rivals has been a strength so far. In its three full calendar years, it has finished above the peer median in two of them, including a top-decile finish in 2023. That year, adding exposure to high-yield bonds through index-level credit derivatives as spreads widened in October and then reducing that exposure as spreads contracted contributed to the fund’s 11.39% gain, 2.71 percentage points better than the peer median.

Credit risk was a big culprit in the ETF’s bottom-half results in 2025, its worst calendar-year showing so far. Amid heightened tariff concerns between Jan. 22 and April 7, 2025, high-yield bond spreads widened more than 200 basis points as relevant Treasury yields declined around 50 basis points. Over that period, the fund’s 1.66% loss placed it in the bottom decile versus distinct peers. The fund rebounded as spreads tightened but did not make enough ground to beat its typical rival that year, as its 7.88% gain in 2025 fell 27 basis points shy of the peer median.

Capital Group U.S. Multi-Sector Inc ETF's Prospectus Adjusted Expense Ratio is 0.39% per year. It places it in the cheapest quintile of the Morningstar US Fund Multisector Bond Category, where the median fee is 0.76% per year. This cost positioning translates into a Medalist Rating Price Score of 2.27, 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.