🌍CGNG: A Smarter Way to Invest in Emerging Growth

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Hello ETF UNO readers. As global markets evolve and the distinction between developed and emerging markets blurs, investors are reconsidering how to access growth beyond the traditional boundaries of the U.S. and Europe.

Today, we focus on the Capital Group New Geography Equity ETF (CGNG). Launched in June 2024, this actively managed equity ETF aims to capitalise on growth opportunities in developing economies while effectively managing the volatility that has historically affected this asset class.

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What is CGNG?

Traditional emerging markets ETFs have long promised high growth potential but often delivered high volatility and disappointing risk-adjusted returns. CGNG seeks to change this narrative by pursuing superior, long-term, risk-adjusted results through broad exposure to developing-country opportunities. The fund's strategy is elegantly simple yet sophisticated: it invests primarily in common stocks of companies with significant exposure to developing countries and markets.

The CGNG strategy is notable for its unique dual approach to capturing growth in emerging markets. Here’s what makes it compelling:

• ✔Dual Investment Approach: CGNG invests not only in companies based in emerging markets but also in multinational companies with significant operations in these developing countries.

• 🌍Twofold Exposure to Growth: Investors gain access to local champions (leading companies in emerging markets) as well as global giants (multinationals benefiting from high-growth regions).

• 📈Long-Term Investor Benefits: The fund aims to deliver returns characteristic of emerging markets while maintaining the volatility typical of developed markets—making it ideal for investors looking for growth without extreme fluctuations.

This innovative strategy offers a smoother path to capturing the potential of emerging economies.

The foundation of this strategy is Capital Group's renowned research team, which has decades of experience in navigating global markets. This actively managed fund leverages Capital Group's high-quality research capabilities and proven investment process, providing individual investors with access to professional management within an ETF structure.

Investment Strategy📊

For ETF UNO readers looking to incorporate CGNG into their portfolios, there are several strategic approaches to consider:

• 🔗Core-Satellite Approach: CGNG can serve as a key component in emerging markets, providing an alternative to traditional passive ETFs. Its active management makes it suitable for a 5-10% allocation in a diversified global equity portfolio for investors seeking emerging market exposure.

• 🛡️Volatility Reduction Strategy: For investors seeking to reduce volatility in traditional emerging markets, CGNG offers a solid alternative. Investing in local companies and multinationals with emerging market exposure provides diversification that can stabilise returns. Consider replacing 50-100% of your current emerging market allocation with CGNG to reduce volatility while maintaining growth potential.

• ⚡Growth Enhancement Tactic: By pairing CGNG with a developed markets ETF, investors can unlock greater global exposure and significantly boost growth potential, making this combination a powerful choice for aggressive, growth-oriented portfolios.

• 🧱Dollar-Cost Averaging Implementation: Launched in June 2024, CGNG offers a great opportunity for dollar-cost averaging. Start with a small position (1-2% of your portfolio) and gradually increase it over 12-18 months to manage entry point risk while benefiting from this innovative strategy.

CGNG at a glance

ETF Issuer: Capital Group

Inception: 2024-06-25

Asset Class: Equities

Underlying Index: CGNG is an active ETF

Geographical Focus: Global

Expense Ratio: 0.64% (as of last data point)

Dividend Yield: 0.66% (as of last data point)

Distribution Frequency: Annual

Historical Performance

While CGNG is a relatively new ETF, its early performance metrics are worth examining. As of December 2025, the fund has delivered an impressive >25% year-to-date return.

What's particularly encouraging is the fund's ability to capture upside while limiting downside. With approximately $1.3 billion in assets under management and more than 200 holdings, CGNG has attracted significant investor interest since its launch, suggesting confidence in Capital Group's approach.

ETF Radar View

The radar chart below shows the general characteristics of the ETF:

Top 3 Reasons to Invest

1. Institutional-Quality Active Management at ETF Prices: CGNG harnesses Capital Group's esteemed institutional research for ETFs. Unlike passive emerging market ETFs that just track indexes, CGNG employs experienced portfolio managers who use fundamental and quantitative analysis to find undervalued opportunities and avoid troubled markets. This active approach is particularly effective in emerging markets, where inefficiencies can create value.

2. Diversified Exposure to Emerging Market Growth: The fund's innovative strategy provides exposure to emerging market growth through various channels. Key holdings include Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), Tencent Holdings, and even Microsoft. This approach captures growth from both local leaders and global firms, creating a more resilient portfolio that isn't reliant on any one market.

3. Volatility Management Through Strategic Diversification: Traditional emerging markets ETFs often struggle with concentration risk and political volatility. CGNG mitigates these issues by including multinational companies with exposure to emerging markets, offering diversification. These global firms typically demonstrate better governance and risk management than pure-play emerging market companies. Consequently, CGNG can deliver emerging market-like returns with lower volatility, benefiting long-term investors.

Top 3 Reasons Not to Invest

1. Limited Track Record and New Strategy: Launched in 2024, CGNG lacks sufficient historical data to evaluate its long-term performance and risk management. While early results appear promising, investors should be cautious about relying on short-term performance. The strategy of combining local emerging market companies with multinationals is relatively untested in an ETF format, creating uncertainty about its performance in various market cycles.

2. Higher Expense Ratio Than Passive Alternatives: CGNG's expense ratio is much higher than that of passive emerging markets ETFs. While active management can justify higher fees, investors should assess if the potential performance benefits outweigh the extra costs over time. For cost-conscious investors, this premium may be hard to justify without a longer performance history.

3. Active Management Risks and Style Drift: As an actively managed fund, CGNG relies on the Capital Group investment team for decision-making, which can sometimes lead to style drift and increased risk. With a turnover rate of nearly 50%, the high trading activity may result in higher transaction costs and tax inefficiencies compared to passive strategies. Investors need to trust that the managers will maintain their discipline during market fluctuations.

🧭CGNG: Where Global Growth Really Happens

CGNG represents a thoughtful evolution in emerging markets investing. By combining exposure to local emerging market companies with multinational corporations that benefit from these high-growth regions, CGNG aims to deliver the best of both worlds: emerging market growth potential with developed market stability.

CGNG offers ETF investors several benefits, including institutional-quality active management and strategic diversification that reduces volatility. However, it has a limited track record, higher fees than passive alternatives, and inherent uncertainties of active management.

CGNG works well as a strategic satellite holding in a diversified portfolio, particularly for those hesitant to invest in emerging markets due to volatility concerns. Start with a modest allocation and monitor its performance against traditional emerging market and global benchmarks.

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DISCLAIMER: This article is for informational purposes only and should not be considered as investment advice. Always conduct your own research and consult with a financial advisor before making investment decisions.