Insights & Resources 

Tax-loss harvesting involves selling an investment that has lost value, reinvesting the proceeds in an investment that provides a similar (but not identical*) allocation and using the capital loss to offset capital gains on another investment, now or in the future, to help reduce the tax impact. ETFs can provide investment exposure similar to other holdings so there’s an opportunity for financial advisors to tax-loss harvest current investments that no longer meet an objective or to choose an investment vehicle that can help minimize capital gain tax liabilities. Because Capital Group’s active core ETFs aim to provide investment solutions for some of the most common portfolio allocations, many of our ETFs can be considered as swaps for funds where investors can tax-loss harvest.

*The Internal Revenue Service’s Wash-Sale Rule regulates the timing around how quickly a substantially identical security can be purchased after the underperforming asset was sold to realize a tax benefit from tax-loss harvesting.

The way ETFs are structured allows for two main sources of tax efficiency. First, individual ETF investors aren’t affected by selling activity within the fund and may only realize capital gains when they sell their own ETF shares. The second source of tax efficiency stems from ETFs’ ability to satisfy redemption requests in the primary market (the section of the capital market where ETF issuers work with an intermediary to adjust the supply of ETF shares in the market), which allows ETF issuers to systematically push out low-cost-basis stocks (the shares carrying the most unrealized capital gains). In this way, ETF issuers can continually work to minimize or completely negate the potential for realizing capital gains in the ETF.

Capital Group’s fixed income ETFs offer investors access to our signature approach to active fixed income management, which leverages The Capital System™ to help investors pursue their long-term financial goals. Our fixed income ETFs draw upon deep fixed income research and decades of experience investing in areas of the market where we believe we can add value by seeking excess return and helping investors pursue their objectives. Furthermore, our fixed income ETFs are new strategies and only available as ETFs.

Additionally, clients who choose the ETF vehicle for fixed income allocations may benefit from the following:

• Liquidity: ETFs trade in the secondary market, typically on an exchange, so they may be bought and sold anytime during the trading day.
• Transparency: With a few exceptions, ETFs offer the ability to view holdings and pricing on a daily basis whereas fixed income mutual funds typically disclose holdings and security pricing quarterly.
• Tax efficiency: ETFs are structured in a way that may offer tax advantages to some investors. 

Capital Group ETFs aren’t clones or conversions of popular retail American Funds mutual funds and have different investment strategies. While there may be some overlap of individual portfolio managers among the teams managing the ETFs and American Funds, the overall portfolio management teams are different and so the vehicles’ holdings (or weightings) will differ — even across investment strategies with similar investment objectives.

Financial professionals who are registered with us and have logged into their accounts can download a detailed view of which American Funds share similar investment objectives as our ETFs (RIAs should enter their Capital Group RIA Insider login credentials). If you haven’t registered with us, you may do so here.

There are several considerations that investors should keep in mind when trading ETFs to ensure an optimal execution experience, such as:

• Use limit orders, which allow investors to specify the price at which the order is executed and thereby allow for more control over pricing, instead of market orders (which are executed immediately, and at the current price).
• Avoid trading during the market open or close when pricing tends to be more volatile.
• For large orders, contact your internal block trading desk.
• Reach out to your Capital Group representative to help connect you with our ETF Capital Markets team for real-time market information and trading assistance. For more information on ETF Capital Markets, see this brochure (log in to view).