Thrivent Asset Management converted two mutual funds into exchange traded funds Monday, bringing its small- and midcap value strategies to the growing ETF market.
The Thrivent Small Cap Value ETF (TSCV) and the Thrivent Mid Cap Value ETF (TMVE) began trading on NYSE Arca after converting from mutual funds, according to the issuer. The small-cap fund holds $146.74 million in assets, with a 0.60% expense ratio. The midcap fund manages $19.88 million and comes with a 0.55% expense ratio.
The ETF conversions give investors access to Thrivent’s active management approach in a more tax-efficient structure. Both funds focus on undervalued companies with improving business fundamentals and stable or rising returns on invested capital, according to the prospectuses.
“The ETF market is experiencing rapid growth and significant client interest, and today’s conversions underscore Thrivent’s work to give clients more flexibility and choice to help them achieve their financial goals,” said Thrivent Mutual Funds President Mike Kremenak.
Chris Parker and Charmaine Chan manage the small-cap fund, which holds 61 stocks. The portfolio’s top holdings include Cushman and Wakefield (CWK) at 2.8%, Plymouth Industrial REIT Inc. (PLYM) at 2.6%, and UMB Financial Corp. (UMBF) at 2.6%, according to data provided by the firm.
The small-cap fund seeks to invest in companies trading at less than 70% of their estimated intrinsic value, according to the fund materials. The investment team conducts detailed analysis of businesses, industries, and management teams to identify high-conviction ideas with two to three times more upside potential than downside risk.
Thrivent ETF Strategy Emphasizes Stock Selection
TMVE applies a similar strategy. Graham Wong and Nicholas Griffith run the midcap fund, which owns 81 stocks. M&T Bank Corp. (MTB) leads the portfolio at 2.7%, followed by U.S. Bancorp (USB) at 2.6% and Sysco Corp. (SYY) at 2.2%.
The midcap fund targets companies with stable or improving return on invested capital and seeks investments that offer more upside potential than downside risk based on scenario modeling, according to the prospectus. The management team looks for attractively valued companies positioned to benefit from catalysts for operating performance improvement.
Both funds previously operated as open-end mutual funds available only to affiliated mutual funds and did not charge management fees. The ETF structure now includes management fees, which may affect future performance compared to the historical mutual fund results, according to the prospectuses.
Kremenak added that Thrivent has years of experience in small- and midcap strategies and active management that the firm will bring to these new ETFs, giving investors another way to diversify and build portfolios.
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