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Products May 23, 2019
Investment Product and Service Launches
American Century to offer ETFs with ActiveShares methodology, and Morningstar reveals global suite of bond indexes.
Reported by Amanda Umpierrez
Art by Jackson Epstein
Art by Jackson Epstein
American Century to Offer ETFs With ActiveShares Methodology
American Century Investments has announced it has filed for exemptive relief for actively managed, semi-transparent exchange-traded funds (ETFs) that will utilize Precidian Investments’ ActiveShares methodology. The structure will allow American Century to deliver investment strategies in these ETF vehicles without the daily holdings disclosure requirement of fully transparent ETFs.
“We’re pleased that we’ll be able to offer our clients another way to access our time-tested investment expertise with the tax advantages inherent in ETFs,” says Edward Rosenberg, senior vice president and head of ETFs for American Century.
American Century joined JP Morgan Asset Management, BlackRock, Capital Research, Legg Mason, ClearBridge, Royce and Nationwide in licensing Precidian’s intellectual property. Precidian’s ActiveShares structure seeks to combine aspects of the traditional mutual fund with the efficiencies and flexibilities of an ETF, says American Century. Precidian’s ETF structure seeks to provide asset managers with the ability to generate excess return without daily disclosure of their proprietary strategies, while simultaneously creating significant improvements in tax efficiency, manager flexibility and lower operating costs.
The funds will be incorporated into American Century’s suite of ETFs. Other offerings include American Century Diversified Corporate Bond ETF (KORP), American Century Quality Diversified International ETF (QINT), American Century STOXX U.S. Quality Growth ETF (QGRO), American Century STOXX U.S. Quality Value ETF (VALQ) and American Century Diversified Municipal Bond ETF (TAXF). STOXX is a registered trademark of STOXX Ltd.
Morningstar Reveals Global Suite of Bond Indexes
Morningstar, Inc. has introduced a global suite of bond indexes that represent all major fixed-income markets and asset classes. These indexes are designed to serve as portfolio benchmarks and building blocks for portfolio construction.
The Morningstar bond indexes define the opportunity set for fixed-income investors in a portfolio-friendly structure by striking a balance between breadth of market coverage and investability, with an emphasis on liquid, tradable securities.
“Fixed income plays an essential role in helping investors achieve their financial goals,” says Sanjay Arya, head of Indexes at Morningstar. “Understanding the underlying market is key to improving investment outcomes, and it is our belief that the democratization of information levels the playing field for everyone across the investment ecosystem. We have constructed a comprehensive global family of bond indexes that represent discrete asset class exposures, without any gaps or overlap.”
“Bond indexing is challenging; yet indexes are more important than ever—as tools for portfolio construction and as bases for investment products,” says Dan Lefkovitz, strategist for Morningstar Indexes. “We want to better reflect the investable market while also offering transparency into critical exposures, such as interest-rate sensitivity, credit quality, and sector allocation.”
The launch of a new index suite is part of Morningstar’s broader investment in the fixed-income space. The company recently updated its fixed-income categories, forming intermediate core bond and intermediate core-plus bond categories. To enable more accurate, consistent and comparable analysis, Morningstar is transitioning from manager-reported to calculated fixed-income data, effective July 31, for portfolios dated as of June 30. Select countries that offer calculated data today, such as Canada, will be transitioned to the global methodology in the near future.