The roster of actively managed ETFs continues to shift based on advisor and investor demand. We try to take note of interesting launches. However, sometimes ETF name and ticker changes also catch our eye. This week, American Century altered the names and tickers of two of their active ETFs.
To learn more, I connected with Joe Reiland, CFA, vice president and senior portfolio manager at American Century. In addition to his portfolio management responsibilities, Reiland also provides quantitative research and risk management for the U.S. Large Cap Growth team. Reiland joined American Century in 2000.
Strategies of ACLC and ACGR
VettaFi: Can you tell us about the investment strategy of the American Century Large Cap Equity ETF (ACLC) and American Century Large Cap Growth ETF (ACGR)?
Reiland: ACLC and ACGR apply a similar investment philosophy and process to different investment universes. ACLC offers diversified exposure to broad U.S. large cap companies benchmarked by the S&P 500 Index, while ACGR invests in U.S. large growth names benchmarked to the Russell 1000 Growth Index.
We believe both strategies can offer the potential for outperformance by focusing on three key attributes:
- Blending fundamental business improvement with corporate sustainability. The investment team aims to invest in companies that show solid business improvement and sustainable practices, ensuring long-term financial gains and positive impacts on the environment, community, and governance.
- Integration over negative screening. Instead of excluding entire sectors, the strategy invests in the most attractive companies across all sectors. It offers an appealing sustainability profile and potential for positive risk-adjusted returns.
- Stock selection drives performance. Portfolio construction focuses on stock-specific risks aligned with financial and sustainability research, while minimizing sector and common factor risks like market cap size, volatility, and momentum.
Why the Name Change?
VettaFi: These ETFs launched several years ago but recently underwent name changes. What drove those changes?
Reiland: Yes, that’s correct. ACLC began trading in July 2020 as Sustainable Equity (ESGA) and ACGR began trading in June 2021 as Sustainable Growth (ESGY). We made the proactive decision to change the names and tickers associated with these strategies in December 2024.
Recent regulations have been enacted that require certain fund names to meet new tests that may be complicated and cumbersome. As a result of the new regulations, we were concerned that the term “Sustainable” would require us to alter the way we have been managing the strategies to conform to the new interpretation of the new Rule 35d-1, commonly referred to as the “Names Rule”.
We continue to believe that owning companies improving their business fundamentals and leading in managing sustainability issues will outperform over time. Sustainability analysis enhances traditional financial analysis, providing a better understanding of risks and opportunities. Changing our fund names enables us to continue managing the strategies consistent with history, without overemphasizing one component over others in our security selection.
The Role of ACLC and ACGR
VettaFi: How should investors think about the role of these strategies in their portfolios?
Reiland: While the ETFs we offer have a more limited track record, the team has been managing our core equity strategy since 2016. Over time we have found that our application of this disciplined and research-driven investment process can deliver solid returns without undue risks.
Since inception each element of our process – overweighting companies who lead in corporate sustainability, with strong and improving corporate fundamentals, and minimizing common factor risks – has added value. For this reason, we believe these strategies can play a significant role within the core equity holdings of a portfolio.
For more news, information, and analysis, visit the Core Strategies Channel.
