Victory Capital has launched a trio of actively managed ETFs offering corporate bond, core plus fixed income and US mid-cap equity exposures.
Mannik Dhillon, President, VictoryShares
The three funds are listed on Nasdaq and all integrate environmental, social and governance (ESG) criteria into their investment processes.
The VictoryShares ESG Corporate Bond ETF (UCRD US) and VictoryShares ESG Core Plus Bond ETF (UBND US) are managed by USAA Investments while the VictoryShares THB Mid Cap ESG ETF (MDCP US) is managed by THB Asset Management.
USAA Investments and THB Asset Management are affiliates of Victory Capital.
Commenting on the launch, Mannik Dhillon, President, VictoryShares, said: “Active ETFs continue to gain traction with investors seeking to access managers who have proven successful in mutual funds and other investment vehicles.
“We are thrilled to offer our clients ETF strategies that blend our deep experience in active management with an ESG lens, which today’s investors are increasingly seeking.”
Fixed income
The VictoryShares ESG Corporate Bond ETF seeks to provide investors with above-average income through a yield-focused portfolio investing primarily in investment-grade corporate bonds with a dollar-weighted average portfolio maturity between three to 10 years.
While the fund is focused primarily on investment-grade bonds, up to 20% of assets may be allocated to high-yield corporate bonds.
The fund has a net expense ratio of 0.40%.
The VictoryShares ESG Core Plus Bond ETF seeks to provide investors with above-average income through a yield-focused portfolio of principally intermediate-term securities including government bonds (including US, state, and local governments, their agencies and instrumentalities), mortgage- and asset-backed securities, corporate bonds and repos.
The fund invests primarily in investment-grade securities but may invest up to 10% of its assets in high-yield securities.
UBND has a net expense ratio of 0.40%.
In selecting investments for both funds, the fund managers analyse economic factors, industry-related information, the underlying financial stability of the issuer of the security, and evaluate whether the issuer demonstrates strong or improving ESG characteristics.
“These new ETFs are distinct in that they combine our bond-by-bond fundamental analysis with our sophisticated, proprietary ESG scoring system,” said James Jackson, Head of Fixed Income Portfolio Management for USAA Investments.
Mid-caps
The VictoryShares THB Mid Cap ESG ETF delivers access to a high-conviction portfolio of approximately 30 mid-cap holdings, primarily in the consumer, healthcare, industrials and information technology sectors. THB considers mid-cap companies to be companies with market capitalizations that are within the range of companies comprising the Russell Mid Cap Index, approximately $1.5 billion to $63bn in market cap.
The fund managers maintain a patient, longer-term investment horizon of 3-7 years, utilizing a proprietary investment process to identify companies with profitable business models, strong operating histories, and low levels of net debt.
The process incorporates an initial multifactor fundamental screen to narrow the universe of eligible stocks before deeper, bottom-up research is carried out to identify and select individual securities.
The fund managers deploy a range of risk management tools developed internally by THB, including a proprietary ESG rating methodology. Fundamentally, the adviser believes there is a strong linkage between high-quality companies, good governance and corporate citizenship, and long-term shareholder value creation.
MDCP has a net expense ratio of 0.55%.
“MDCP invests in a focused, high-conviction portfolio of approximately 30 mid-cap stocks that our team believes represent high-quality, low-risk businesses with the potential to prudently grow shareholder equity over time. We are excited to bring our team’s long history of integrating ESG factors into our investment process to investors through an ETF vehicle,” said Christopher Cuesta, Chief Investment Officer for THB Asset Management.