Adding Three New Funds to Active ETF Lineup
In response to growing client demand, American Century Investments, a $235 billion (Assets under management as of 6/28/21) global asset manager, today launched three additions to its active exchange traded funds (ETF) lineup. American Century® Sustainable Growth ETF (ESGY)2,3 American Century® Multisector Income ETF (MUSI)4,5,6,7 and American Century® Emerging Markets Bond ETF (AEMB)4,5,6 all are 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."
Following is information on the three new funds:
American Century Sustainable Growth ETF (ESGY)
ESGY is designed for investors seeking a risk-aware large cap growth portfolio that integrates ESG data in an effort 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 your investment. For example:
You 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 you pay to buy fund shares on an exchange may not match the value of the fund's portfolio. The same is true when you 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 are able to copy or predict the fund's investment strategy, however, this may hurt the fund's performance.
For additional information regarding the unique attributes and risks of this ETF, see the additional risk discussion at the end of this material.
ESGY is an extension of American Century's successful Sustainable Equity strategy, which includes the launch of ESGA in July 2020, as well as 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 .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 .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 .39 percent.
About American Century Investments
Who We Are
American Century Investments is a leading global asset manager focused on delivering investment results and building long-term client relationships while supporting breakthrough medical research.
Quick Facts
Founded in 1958, American Century Investments' 1,400 employees serve financial professionals, institutions, corporations and individual investors from offices in Kansas City, Missouri; New York; Los Angeles; Santa Clara, California; Portland, Oregon; London; Frankfurt, Germany; Hong Kong; and Sydney.
Management
Jonathan S. Thomas is president and chief executive officer, and Victor Zhang serves as chief investment officer.
Giving Back
Delivering investment results to clients enables American Century Investments to distribute over 40% of its dividends to the Stowers Institute for Medical Research, a 500-person, nonprofit basic biomedical research organization. The Institute owns more than 40% of American Century Investments and has received dividend payments of more than $2 billion since 2000.
Excess return, in investment management literature, is used in risk-adjusted return discussions and risk-adjusted return calculations, such as the Sharpe Ratio. It equals the return of a portfolio minus the return of what is considered to be a relatively risk-free asset, such as a U.S. Treasury bill.
You should consider the fund's investment objectives, risks, charges and expenses carefully before you invest. The fund's prospectus or summary prospectus, which can be obtained by visiting AmericanCenturyETFs.com , contains this and other information about the fund, and should be read carefully before investing. Investments are subject to market risk.
Exchange Traded Funds (ETFs) are bought and sold through exchange trading at market price (not NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV in the secondary market. Brokerage commissions will reduce returns.
These funds are actively managed ETFs that do not seek to replicate the performance of a specified index. To determine whether to buy or sell a security, the portfolio managers consider, among other things, various fund requirements and standards, along with economic conditions, alternative investments, interest rates and various credit metrics. If the portfolio manager considerations are inaccurate or misapplied, the fund's performance may suffer.
Investment return and principal value of security investments will fluctuate. The value at the time of redemption may be more or less than the original cost. Past performance is no guarantee of future results.
Separately Managed Accounts (SMAs) are investment services provided by American Century Investment Management, Inc. (ACIM) a federally registered investment advisor. SMAs are not available for purchase directly through ACIM. Client portfolios are managed based on investment instructions or advice provided by the client's advisor or program sponsor. Management and performance of individual accounts may differ from those of the model portfolio as a result of advice or instruction by the client's advisor, account size, client-imposed restrictions, different implementation practices, the timing of client investments, market conditions, contributions, withdrawals and other factors.
The fund is an actively managed ETF that does not seek to replicate the performance of a specified index.
Proxy Portfolio Risk: The goal of the Proxy Portfolio is to track closely the daily performance of the Actual Portfolio. The Proxy Portfolio is designed to reflect the economic exposures and the risk characteristics of the Actual Portfolio on any given trading day.
ETFs trading on the basis of a published Proxy Portfolio may exhibit wider premiums and discounts, bid/ask spreads, and tracking error than other ETFs using the same investment strategies that publish their portfolios on a daily basis, especially during periods of market disruption or volatility. Therefore, shares of the fund may cost investors more to trade than shares of a traditional ETF.
Each day the fund calculates the overlap between the holdings of the prior Business Day's Proxy Portfolio compared to the Actual Portfolio (Proxy Overlap) and the difference, in percentage terms, between the Proxy Portfolio per share NAV and that of the Actual Portfolio (Tracking Error).
Although the fund seeks to benefit from keeping its portfolio information secret, market participants may attempt to use the Proxy Portfolio to identify a fund's trading strategy, which if successful, could result in such market participants engaging in certain predatory trading practices that may have the potential to harm the fund and its shareholders.
Premium/Discount Risk: Although the Proxy Portfolio is intended to provide investors with enough information to allow for an effective arbitrage mechanism that will keep the market price of the fund at or close to the underlying net asset value (NAV) per share of the fund, there is a risk (which may increase during periods of market disruption or volatility) that market prices will vary significantly from the underlying NAV of the fund.
Trading Issues Risk: Trading halts may have a greater impact on this fund compared to other ETFs due to the fund's nontransparent structure.
Authorized Participant Concentration Risk: Only an authorized participant may engage in creation or redemption transactions directly with the fund. The fund may have a limited number of institutions that act as authorized participants. The fact that the fund is offering a novel and unique structure may affect the number of entities willing to act as Authorized Participants. During times of market stress, Authorized Participants may be more likely to step away from this type of ETF than a traditional ETF.
Many of American Century’s investment strategies incorporate sustainability factors, using environmental, social, and/or governance (ESG) data, into their investment processes in addition to traditional financial analysis. However, when doing so, the portfolio managers may not consider sustainability-related factors with respect to every investment decision and, even when such factors are considered, they may conclude that other attributes of an investment outweigh sustainability factors when making decisions for the portfolio. The incorporation of sustainability factors may limit the investment opportunities available to a portfolio, and the portfolio may or may not outperform those investment strategies that do not incorporate sustainability factors. ESG data used by the portfolio managers often lacks standardization, consistency, and transparency, and for certain companies such data may not be available, complete, or accurate.
Sustainable Investing Definitions:
Integrated: An investment strategy that integrates sustainability-related factors aims to make investment decisions through the analysis of sustainability factors alongside other financial variables in an effort to make more informed investment decisions. A portfolio that incorporates sustainability factors may or may not outperform those investment strategies that do not incorporate sustainability factors. Portfolio managers have ultimate discretion in how sustainability factors may impact a portfolio’s holdings, and depending on their analysis, investment decisions may not be affected by sustainability factors.
Sustainability Focused: A sustainability-focused investment strategy seeks to invest, under normal market conditions, in securities that meet certain sustainability-related criteria or standards in an effort to promote sustainable characteristics, in addition to seeking superior, long-term, risk-adjusted returns. Alternatively, or in addition to traditional financial analysis, the investment strategy may filter its investment universe by excluding certain securities, industry, or sectors based on sustainability factors and/or business activities that do not meet specific values or norms. A sustainability focus may limit the investment opportunities available to a portfolio. Therefore, the portfolio may underperform or perform differently than other portfolios that do not have a sustainability investment focus. Sustainability-focused investment strategies include but are not limited to exclusionary, positive screening, best-in-class, improvers, thematic, and impact approaches.
The fund is classified as non-diversified. Because it is non-diversified, it may hold large positions in a small number of securities. To the extent it maintains such positions; a price change in any one of those securities may have a greater impact on the fund's share price than if it were diversified.
Generally, as interest rates rise, the value of the bonds held in the fund will decline. The opposite is true when interest rates decline.
The lower rated securities in which the fund invests are subject to greater credit risk, default risk and liquidity risk.
International investing involves special risks, such as political instability and currency fluctuations. Investing in emerging markets may accentuate these risks.
Derivatives may be more sensitive to changes in market conditions and may amplify risks.
Exchange Traded Funds (ETFs): Foreside Fund Services, LLC - Distributor, not affiliated with American Century Investment Services, Inc.
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