American Century Investments has expanded its line-up of actively managed ETFs with the introduction of three new funds on NYSE Arca.
Edward Rosenberg, Head of ETFs for American Century Investments.
The funds comprise one equity strategy and two fixed income strategies.
The equity fund, the American Century Sustainable Growth ETF (ESGY US), invests in US large-cap growth stocks that satisfy environmental, social, and governance (ESG) criteria.
The fund utilizes a semi-transparent active ETF structure that shields the portfolio managers’ proprietary investment strategy, helping to mitigate the risk of front-running.
The two fixed income funds disclose their holdings on a daily basis. They are the American Century Emerging Markets Bond ETF (AEMB US), which targets hard currency debt from a range of emerging market issuers, and the American Century Multisector Income ETF (MUSI US), which invests across multiple bond sectors globally in a bid to provide consistent income during all market cycles.
Ed Rosenberg, Head of ETFs at American Century Investments, commented: “We chose to expand our line-up and roll out these particular products right now to help meet investor needs. ESGY helps fulfil clients’ desires for ESG-style products that are actively managed, while AEMB and MUSI offer additional choice and differentiation in income products in an environment where yields continue to stay low.”
Sustainable growth
The American Century Sustainable Growth ETF is co-managed by Joe Reiland, 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 provides access to a risk-aware US large-cap growth portfolio that integrates ESG data in an effort to deliver competitive returns with a positive impact.
The process involves assigning each security from the US large-cap equity universe with a financial metrics score and an ESG score that are then combined on an equal basis to create an overall score.
The financial metrics score is determined by a firm’s exposure to the growth factor (which reflects past growth in earnings and cash flow as well as estimates of future earnings). The model also considers stock price momentum.
The ESG score is determined by evaluating multiple metrics across each of the three ESG pillars using internal research as well as third-party commercial data and scoring systems. Examples of such metrics include a firm’s carbon emission profile, employee turnover rate, digital privacy, corporate leadership structure, and compensation packages.
The fund will typically hold securities with the strongest scores in their respective sectors. The process aims to build a portfolio with stronger ESG and risk-adjusted return profiles compared to the Russell 1000 Growth Index.
Commenting on the fund, Sandra Testani, Vice President of ETF Product and Strategy at American Century Investments, said: “We created ESGY as another step toward advancing our commitment to corporate responsibility and sustainable investing. Our ownership structure directs over 40% of its profits to fund medical research, so offering this particular ETF is a natural fit for us.”
The ETF comes with an expense ratio of 0.39%.
Emerging markets bond
The American Century Emerging Markets Bond ETF is co-managed by John Lovito, Senior Vice President and co-CIO of Global Fixed Income; Thomas Youn, portfolio manager and Senior Corporate Analyst; and Alessandra Alecci, Vice President, portfolio manager, and Senior Sovereign Analyst.
The fund invests in debt securities from sovereign, quasi-sovereign, and corporate entities from emerging markets. Emerging market countries are defined as those within the JPMorgan EMBI Global Diversified Index.
The ETF focuses on bonds denominated in hard currencies although local currency bonds may also be held to a much lesser extent. There are no restrictions on credit quality.
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 robust emerging markets macro and thematic analysis.
According to American Century, the result is an active, high-conviction approach that seeks to deliver superior risk-adjusted returns over a full market cycle.
“AEMB offers investors compelling yield opportunities,” said Rosenberg. “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 US stocks and bonds.”
The ETF has an expense ratio of 0.39%. Distributions are sent to investors on a monthly basis.
Multi-sector income
The American Century Multisector Income ETF is co-managed by Charles Tan, Senior Vice President and co-CIO of Global Fixed Income; Jason Greenblath, Vice President and senior portfolio manager; and Jeff Houston, Vice President and senior portfolio manager.
The fund aims to deliver consistent income throughout the market cycle by dynamically investing across several fixed income sectors globally including investment-grade corporate, high-yield corporate, emerging market debt, and securitized bonds. The ETF has no average maturity or duration limitations, and up to two-thirds of the portfolio may be allocated to non-investment-grade securities.
The portfolio managers use a sector rotation approach that integrates proprietary fundamental research and quantitative model inputs, such as economic activity, inflation and monetary policy, and technical analysis of relative value among various sectors.
Security selection is then driven by fundamental, bottom-up analysis to assess relative value and creditworthiness among issuers.
“We think MUSI is a potential solution for income-oriented investors as they continue to search for yield in this ‘lower-for-longer’ environment,” added Rosenberg.
The ETF’s expense ratio is 0.35%. Distributions are made monthly.