- 45% of mutual funds still paid capital gain distributions† in 2022, despite poor market returns
- 4% of ETFs paid capital gain distributions
- 0 Capital Group ETFs paid capital gain distributions
For tax-sensitive investors, a major potential benefit of ETFs has always been fewer or no capital gain distributions. However, a once-common myth was that ETFs are more tax efficient than mutual funds because ETFs are predominantly passively managed. In 2022, Capital Group’s actively managed ETFs reinforced that ETFs can be more tax efficient than mutual funds due to the vehicle structure, not because of passive management or active management.†
Mutual funds paid capital gains at a much higher rate than ETFs in 2022
There were few places for investors to hide in 2022, with equity and fixed income markets broadly producing double-digit negative returns. Despite weak markets, 45% of all mutual funds paid capital gains in 2022 according to Morningstar. Meanwhile, 4% of all ETFs paid capital gains during the same period.
% of funds that distributed capital gains in 2022
Mutual funds | ETFs | |
---|---|---|
All | 45% | 4% |
Actively managed | 46% | 6% |
Passively managed | 32% | 2% |
Equity | 60% | 4% |
Fixed income | 13% | 3% |
Source: Morningstar. Data is as of December 31, 2022, as is the latest available as of January 20, 2023.
When comparing the management styles, just 6% of actively managed ETFs and 2% of passively managed ETFs distributed capital gains in 2022. The narrow difference emphasizes that the ETF vehicle structure is what brought greater tax efficiency, not the investment approach itself.
Get the latest on Capital Group ETFs
Don’t miss insights and ideas for using our ETFs
Capital Group ETFs distributed no capital gains in 2022
Capital Group ETFs' short history, a volatile market environment and the features of the vehicle helped our ETFs distribute no capital gains in 2022. While there’s no guarantee Capital Group ETFs will continue to pay no capital gain distributions in the future, we continue to leverage an extensive array of resources to help identify opportunities to reduce capital gains distributed to fund shareholders.
Ticker | Fund | Morningstar category | Expense ratio1 |
CGGR | Capital Group Growth ETF | Large Growth | 0.39% |
CGXU | Capital Group International Focus Equity ETF | Foreign Large Growth | 0.53% |
CGGO | Capital Group Global Growth Equity ETF | World Large Stock Growth | 0.47% |
CGDV | Capital Group Dividend Value ETF | Large Value | 0.33% |
CGUS | Capital Group Core Equity ETF | Large Blend | 0.33% |
CGCP | Capital Group Core Plus Income ETF | Intermediate Term Core Plus Bond | 0.34% |
CGSD | Capital Group Short Duration Income ETF | Short-Term Bond | 0.25% |
CGMS | Capital Group U.S. Multi-Sector Income ETF | Multisector Bond | 0.39% |
CGMU | Capital Group Municipal Income ETF | Muni National Intermediate | 0.27% |
Investment category |
|||
Growth | Growth and income | Taxable | Tax-exempt |
Source: Morningstar Direct.