Attendees at the Future Proof conference in Huntington Beach, Calif., in September could be forgiven for mistaking Capital Group's exhibition for a pickleball club. The thwack of rackets hitting balls emanated from the court the fund company had installed behind its booth.

For Scott Davis, who heads the exchange-traded fund and separately managed accounts business at Capital Group, pickleball represents his message to advisors in attendance. "We want investors to get active on the court and active in their portfolios," he says, adding that pickleball is one of the fastest-growing sports and ETFs are one of the fastest-growing investment vehicles.

Growth in the use of model portfolios by financial advisors is key to understanding the trend, says Davis, who spoke with Barron's Advisor in mid-September at Future Proof as well as in New York in August. An edited version of the conversations follows.

Tell me about your role. I've been at Capital for 18 years now and have various roles across the organization. But my responsibilities today are for our ETF business, as well as our separately managed account business.

How do model portfolios fit into your job? ETFs get a lot of the headlines, and the top-line growth in ETFs is impressive, but a lot of it is being powered by the growth in model portfolios that are using ETFs. The newer phenomenon is that no longer do models have to simply rely on passive ETFs. Now they have the option to use active ETFs. And that's fueling a lot of the growth.

Broadridge's first quarter 2026 model portfolio report found a pretty significant increase in active ETFs being used within model portfolios. The share grew from about 5.6% in the second quarter of 2025 to 8.7% in the first quarter of 26. That's over three percentage points of market share being used in active ETFs in less than a year.

Passive ETFs have been used in models for some time. Those numbers also increased, but at a lower rate. They went from 47.8% to a 48.9% share. And so when you look at that, you know over 50% of the assets in models are being allocated to ETFs, either active or passive.

What is the other 50%? It's mostly mutual funds. And mutual funds went from 40.5% to 37%. Models can also include other things, including SMAs and individual securities. I'll give you a couple more statistics. Broadridge estimates total assets in model portfolios were $9.3 trillion as of Q1, 2026. They project assets will grow at 15.4% through 2030.

At Capital Group, we're an active ETF provider. Active ETF assets are now around $16 trillion, or nearly 13% of ETF assets, which is up from just 2% before rule 6c-11 passed in 2019. [The rule changed some ETF regulations.] 6c-11 was the starter's pistol for a lot of product development.

Now the conversation is shifting from what are the new ETFs that are coming to more about how you're implementing them. And, frequently how you're implementing them is into model solutions.

Why are advisors using model portfolios so much? Based on our latest study, among the highest growth advisors that we talked to, 58% are using model portfolios. Their usage rate is 25% higher than the average advisor. So the correlation there is obvious. If you use models, it helps you grow your practice faster because you can spend less time on model construction and investment selection. You can spend less time there and more time with clients, growing your business, or providing additional services to your clients.

In terms of outcomes, how do models perform? Our experience in models is that they've delivered on their investment objectives. What they do well is deliver consistency across clients. So now instead of creating bespoke portfolios, starting from scratch every time, you've got a model that, once you profile a client, you can say to them, "OK, I think you belong in our growth, or our growth and income model."

What is the case for using an active ETF in a model portfolio versus a passive? A benchmark-oriented index ETF is going to give you benchmark returns, benchmark risk, benchmark downside, all of those things. So you might select an active manager if you want to achieve something other than that, something better than the benchmark in terms of returns, or perhaps lower volatility or higher income.

Can you give me an example? Our Capital Group Dividend Value ETF is benchmarked to the S&P 500. CGDV-we call it by its ticker-focuses on high-quality dividend-paying companies. It delivers high income with downside protection, but it has actually outperformed the S&P 500. So when you add that to a portfolio, either as a complement to the S&P 500 or as a replacement, it can improve the total outcome of the portfolio.

It's a bit of a new frontier. If you were in models and you once were only able to use index ETFs, now you can look for better options. And, if you're new to models, you have choices, both in the investment vehicle and in investment strategy, active or passive.

What are some other examples of your active ETFs that are attracting advisor interest for use in model portfolios? I'll give you three. First, Capital Group Growth ETF, CGGR, is our U.S.-focused growth fund. We often find that people pair it together with CGDV to get exposure to the market in a way that has performed better than a passive index option. Those are two of our largest funds.

On the fixed-income side, actively managed strategies continue to be quite popular with our advisor base. I'll highlight Capital Group U.S. Multi-Sector Income, or CGMS. It's being used in portfolios that are designed for people who are seeking higher income, often because they're in retirement or near retirement, and invests across a range of securities, including high-yield corporates, investment grade corporates, and securitized mortgage-backed securities. Today, the 30-day SEC yield is 6.1%. So that's a yield that many will find attractive in order to meet their income needs.

What's an example of one that was an unexpected favorite? I'll tell you one that we launched as a response to advisor demand that actually was a little surprising to us. It's a balanced ETF called Capital Group Core Balanced, or CGBL. The concept of a balanced fund isn't new at all. In fact, it's quite old. When we launched ETFs, there weren't any balanced funds of size that we saw. And we really weren't sure that that was something that we needed to launch, but enough advisors asked us about it so we said, "Certainly, we can develop that."

To our surprise, it has grown quite quickly. It's the largest fund in the category, with over $7 billion in assets, which is a very large ETF for something that is new. I think it was revealing that if you can deliver value, stock selection, portfolio rebalancing, and asset allocation all in one wrapper in a very tax-efficient and tradable and transparent way, there's a market for it. That fund comes with a total expense ratio of 33 basis points. So it's a very cost-effective, very accessible strategy for people. We've been pleasantly surprised with the growth.

Does it still seem like we're in early days for active ETFs if active is 8.7% of total assets? I think we have a long way to go. Because if you think about it, many investment firms, advisors, and home-office research teams, want to see new products season in the market before they choose to invest. So while 2019 was sort of the start of everything as far as active ETFs, and asset managers, including Capital Group, have been bringing ETFs to market now for several years, those ETFs are still being seasoned in the market and still growing their assets under management.

As I think about our own experience, we started with six ETFs in February of 2022. [Capital Group doesn't offer passive ETFs.] We launched three more later that year and we've now grown to 25 and have $157 billion spread across those 25 ETFs. Asset allocators are comfortable with our size and our scale and the durability and resilience of those funds, that now they can be considered for allocations in their models. As they get more comfortable with actively managed strategies being delivered in the ETF vehicle, they will probably use them more frequently. So the 8% should go up from here.

Can you change a model and make it custom? The answer is yes, we have a custom model service here where we are able to blend ETFs or mutual funds or even separately managed accounts, if that's what advisors want, into a custom solution for clients.

I think the customization that's most common in the industry, especially in the RIA community, is when they can customize a model to infuse some of their own investment philosophy and still gain the scale that they want to have as they serve their investors. For example, let's say they want to be known as the RIA to turn to when you want income, they might have their own income model. Or if they want to be known as the growth guys, or the impact investing team-however they want to position themselves as investors-they would create their model and scale it.

Expenses also come into play. Advisors may want to blend active and passive to give clients a lower total cost of ownership in a portfolio. So there's all sorts of ways to customize models. Generally what we do when we engage with advisors is we explain how it works and what we can do.

Do you think pickleball will be an annual activity at Future Proof? It isn't a forever thing, but I think it is consistent with our message to encourage people to get active and to take advantage of the new options out there. And it is fun.

Thank you, Scott.