On Thursday, in response to growing client demand, American Century Investments, a $235 billion global asset manager, launched three additions to its active exchange traded funds (ETF) lineup. The American Century Sustainable Growth ETF (ESGY), the American Century Multisector Income ETF (MUSI), and the American Century Emerging Markets Bond ETF (AEMB) are all listed on the NYSE Arca exchange.
“We chose to expand our lineup and roll out these particular products right now to help meet investor needs,” said Ed Rosenberg, American Century’s head of ETFs. “MUSI and AEMB offer additional choice and differentiation in income products in an environment where yields continued to stay low. ESGY helps fulfill clients’ desires for Environmental, Social and Governance (ESG)-style products that are actively managed.”
American Century Sustainable Growth ETF (ESGY)
ESGY is designed for investors seeking a risk-aware large cap growth portfolio that integrates ESG data to deliver competitive returns with a positive impact. The team follows the philosophy that excess returns may be achieved by investing in companies with improving business fundamentals and sustainable corporate behaviors. Their approach to ESG integration seeks to invest primarily in companies they believe manage ESG risks and opportunities better than their sector peers. By recognizing early signs of business improvement, the team aims to identify large-company growth stocks near the beginning of a cycle of improving earnings, increasing earnings estimates, and expanding stock-price multiples. Because they consider environmental, social, and governance (ESG) issues alongside traditional financial information, the team believes it gains a more comprehensive view of value, risk, and return potential.
“We created ESGY as another step toward advancing our commitment to corporate responsibility and sustainable investing,” said Sandra Testani, vice president of ETF product and strategy. “Our ownership structure directs over 40% of its profits to fund medical research, so offering this particular ETF is a natural fit for us.”
This fund is different from traditional ETFs. Traditional ETFs tell the public what assets they hold each day. This fund will not. This may create additional risks for investments. For example:
- Investors may have to pay more money to trade the fund’s shares. This fund will provide less information to traders, who tend to charge more for trades when they have less information.
- The price investors pay to buy fund shares on an exchange may not match the value of the fund’s portfolio. The same is true when investors sell shares. These price differences may be greater for this fund compared to other ETFs because it provides less information to traders.
- These additional risks may be even greater in bad or uncertain market conditions.
- The ETF will publish on its website each day a “Proxy Portfolio” designed to help trading in shares of the ETF. While the Proxy Portfolio includes some of the ETF’s holdings, it is not the ETF’s actual portfolio.
The differences between this fund and other ETFs may also have advantages. By keeping certain information about the fund secret, this fund may face less risk that other traders can predict or copy its investment strategy. This may improve the fund’s performance. If other traders can copy or predict the fund’s investment strategy, this may hurt the fund’s performance.
ESGY is an extension of the American Century’s successful Sustainable Equity strategy, which includes the launch of ESGA in July 2020, a mutual fund (AFDIX), and a separately managed account.
ESGY is co-managed by Joe Reiland, CFA, vice president and portfolio manager; Rob Bove, portfolio manager; Scott Marolf, portfolio manager, and senior investment analyst; and Rene Casis, vice president, and ETF portfolio manager. The fund is semi-transparent, meaning the portfolio publishes a proxy portfolio each day and is actively managed with an expense ratio of 0.39 percent.
American Century Multisector Income ETF (MUSI)
MUSI is designed for investors pursuing consistent income in a tax-efficient ETF vehicle. The team targets attractive yield throughout the market cycle while offering investors access to a diverse opportunity set of securities, including investment grade corporate, high-yield corporate, emerging market debt, and securitized bonds. Sector allocation decisions are based on global macro-outlook, historical spreads, and cross-sector valuations and are informed by American Century’s global macro strategy & sector specialist team views. Security selection is led by long-tenured sector specialists who apply fundamental, bottom-up analysis to assess relative value and creditworthiness.
“We think MUSI is a potential solution for income-oriented investors as they continue to search for yield in this ‘lower-for-longer environment,” Rosenberg said.
MUSI is co-managed by Charles Tan, senior vice president and co-CIO, Global Fixed Income; Jason Greenblath, vice president and senior portfolio manager; and Jeff Houston, CFA, vice president and senior portfolio manager. The fund is a transparent active ETF with holdings disclosed daily and an expense ratio of 0.35 percent.
American Century Emerging Markets Bond ETF (AEMB)
AEMB is designed for investors seeking enhanced emerging markets debt yield and diversification in a tax-efficient ETF wrapper. The fund seeks to provide a high level of current income and attractive risk-adjusted returns throughout the market cycle, using a fundamental approach. AEMB primarily invests in hard currency emerging markets debt issued by emerging markets sovereign, quasi-sovereign, and corporate entities.
The security selection process incorporates traditional credit analysis. The team believes that the best way to exploit inefficiencies inherent in emerging markets is to combine a fundamental research-driven bottom-up approach with a robust emerging markets macro and thematic analysis. The result is an active, high-conviction approach that seeks to deliver superior risk-adjusted returns over a full market cycle.
“Similar to MUSI, we believe that AEMB offers investors compelling yield opportunities. However, it also provides access to a growing part of the global economy through a meaningful asset class where debt issuance has outpaced developed markets and offers diversification to traditional U.S. stocks and bonds,” Rosenberg said.
AEMB is co-managed by John Lovito, senior vice president and co-CIO, Global Fixed Income; Thomas Youn, portfolio manager and senior corporate analyst; and Alessandra Alecci, vice president, portfolio manager and senior sovereign analyst. The fund is a transparent active ETF with holdings disclosed daily and an expense ratio of 0.39 percent.
For more information, visit AmericanCenturyETFs.com.