Capital Group's Bold Entry into Small and Mid-Cap ETF Market

Capital Group has unveiled its first ETF focusing on small and mid-cap U.S. stocks, tapping into a relatively untapped portion of the ETF sector. With only a fraction of the vast U.S. ETF market dedicated to smaller-cap stocks, the new fund aims to capitalize on growing investor interest and demand.

On Thursday, Capital Group introduced its inaugural exchange-traded fund (ETF) targeting small and mid-cap U.S. stocks, a section of the ETF market where new offerings are scarce.

Accounting for only about $440 billion out of the over $10 trillion invested in U.S. ETFs, smaller-cap stocks present a field teeming with potential, according to Todd Sohn, an ETF strategist at Strategas. "This remains an area ripe with opportunity," stated Sohn.

The Capital Group U.S. Small and Mid-Cap ETF is the last component needed for the firm to complete its model portfolios by the first quarter of 2025, said Holly Framsted, head of ETFs at the company. Investor demand for this type of product catalyzed its development, as small-cap ETFs typically face challenges due to their association with many unprofitable firms, Sohn noted.

(With inputs from agencies.)