Diversified Fixed-Income Strategies in a Rising Rate Environment: The Case for Capital Group Multi-Sector Income Select ETF (Canada)

In an era marked by persistent inflation and central banks recalibrating monetary policy, investors face a pivotal challenge: how to preserve capital while generating income in a rising rate environment. Traditional fixed-income assets, long seen as safe havens, now risk underperforming as yields climb and bond prices falter. For income-focused investors, the solution lies not in rigid strategies but in dynamic, diversified approaches that adapt to shifting market realities. The Capital Group Multi-Sector Income Select ETF (Canada) (CGBIN) exemplifies this philosophy, offering a compelling blend of risk management and yield generation tailored to today's economic landscape.

A Multi-Sector Approach to Navigating Rate Hikes

The ETF's core strength lies in its multi-sector strategy, which avoids overreliance on any single bond type. By allocating 35.4% to high-yield corporate bonds, 24.9% to investment-grade corporates, 11.5% to emerging markets, and 25.2% to securitized debt, the fund balances the higher returns of riskier assets with the stability of safer ones. This diversification is critical in a rising rate environment, where different sectors respond asymmetrically to policy shifts. For instance, high-yield bonds often outperform in inflationary periods due to their higher coupon payments, while securitized debt—such as mortgage-backed securities—can offer liquidity and capital preservation.

The fund's active management further enhances its resilience. Portfolio managers can adjust duration and sector weights in real time. With an effective duration of 4.6 years, the fund is less sensitive to rate spikes than longer-duration alternatives. This moderate sensitivity, combined with the ability to tilt toward shorter-term, higher-yielding securities, ensures that the fund can weather volatility without sacrificing income.

Strategic Hedging and Experienced Leadership

A rising rate environment is not just about bond price sensitivity—it also introduces currency risks, particularly in emerging markets. CGBIN mitigates this by hedging its CAD exposure, aligning its benchmark with Canadian dollar terms. This feature is especially relevant for Canadian investors, who face a dual challenge of rate hikes and currency fluctuations.

Behind the fund's success is a team of seasoned professionals, including Robert Burgess and Xavier Goss, who bring decades of experience in navigating complex market cycles. Their ability to opportunistically rotate between sectors—such as increasing exposure to emerging markets during periods of relative stability or shifting toward investment-grade debt during volatility—provides a competitive edge.

Performance and Yield: A Numbers-Driven Argument

As of July 18, 2025, CGBIN's yield to maturity stands at 6.44%, with an average coupon of 6.2%. These metrics highlight its focus on income generation, a rarity in a world where many fixed-income assets still trade near historic lows. The fund's monthly distributions further enhance its appeal for retirees and income seekers, offering predictable cash flows in an uncertain environment.

While the fund's assets under management ($171.9 million) may seem modest, its performance-to-date underscores the power of active management. A 0.14% NAV price increase and a 6.32% yield to worst as of July 2025 reflect its capacity to deliver consistent returns even as rates rise.

A Balanced Path Forward

For investors, the lesson is clear: in a rising rate environment, fixed-income strategies must evolve beyond traditional benchmarks. CGBIN's multi-sector approach, dynamic risk management, and hedging capabilities make it a standout option for those seeking to balance income with capital preservation. Its 0.52% management fee, while higher than passive alternatives, is justified by the active strategies that protect against rate-driven volatility.

However, investors should remain mindful of the fund's exposure to high-yield and emerging markets, which carry inherent credit and liquidity risks. Diversification within the fund's portfolio helps mitigate these, but a rising rate environment could still test its resilience if defaults rise.

Conclusion

The Capital Group Multi-Sector Income Select ETF (Canada) is more than a fixed-income vehicle—it is a testament to the importance of adaptability in a shifting macroeconomic landscape. By combining sector agility, strategic hedging, and seasoned leadership, it offers a blueprint for generating income without surrendering to the volatility of rising rates. For income-focused investors, this ETF represents a compelling, well-structured solution to one of today's most pressing challenges.