KANSAS CITY, Mo., Feb. 18, 2021 /PRNewswire/ -- On the heels
of the three-year anniversary of its first exchange traded funds
(ETFs), global asset management firm American Century Investments
today rolled out the latest additions to its lineup: American
Century Quality Convertible Securities ETF (QCON)
and American Century American Century Quality Preferreds ETF
(QPFF), listed on the CBOE BZX Exchange, Inc. (CBOE). QCON is
designed for investors seeking high-quality convertible securities
that offer the potential for attractive risk-adjusted returns, and
QPFF is designed for investors seeking high-quality preferred
securities that offer the potential for high current income and
attractive total return. Both are actively managed with holdings
disclosed daily and have a total expense ratio of .32 percent.
The investment philosophy underlying these ETFs offers clients a
potential alternative to the limitations of a passive, index-based
approach to investing in these markets, according to Ed Rosenberg, head of ETFs for the firm. "We
believe an investment approach that combines quantitative and
fundamental insights can address the inherent biases of the
benchmark portfolio construction," he said. "To us, these biases
are driven by the market capitalization of underlying issues and is
agnostic to various fundamental and market risks, leading to
unintended portfolio outcomes.,"
QCON and QPFF are customized to each market's unique risk/return
attributes, said ETF Portfolio Manager Rene
Casis. "These strategies attempt to improve on the passive
approach to investing, offering upside potential by focusing on
high-quality businesses and day-to-day monitoring of opportunities
and risks. We're excited to add these solutions to our ETF
suite."
QCON's managers use quantitative methods to screen and invest in
U.S. dollar-denominated convertible securities in two categories:
bond-like and equity sensitive. Results from each category are
combined and sized to achieve an optimal risk-balanced portfolio
relative to benchmark exposures.
With QPFF, the managers apply quantitative and fundamental
methods to screen and invest in U.S. dollar-denominated preferred
and hybrid securities (which combine both equity and debt
characteristics) that demonstrate favorable quality, yield and
valuation metrics against the benchmark. The strategy aims to be
benchmark aware, while seeking to provide sector diversification
relative to the benchmark as well as exposure to higher quality
credit issues.
The funds are comanaged by Hitesh
Patel, CFA, FRM and Casis. Patel joined American Century
from UBS Securities in 2018 and Casis from 55 Institutional, and
BlackRock prior to that, in 2018.
Today's launch of QCON and QPFF follows last month of the firm's
first low-volatility ETF, LVOL, and rounds out a successful
three-year period for American Century's ETF business.
"American Century has been one of the fast-growing new
entrants into the ETF space," Rosenberg said. "With our American
Century and Avantis Investors® ETFs combined, we've
raised more than $3.5 billion since
2018." Its initial offerings, American Century
STOXX®1 U.S. Quality Value (VALQ) and
American Century Diversified Corporate Bond (KORP) rolled out
January 2018, followed by American
Century Quality Diversified International ETF (QINT), American
Century STOXX®1 U.S. Quality Growth ETF (QGRO) and
American Century Diversified Municipal Bond ETF (TAXF) later that
year. (STOXX is a registered trademark of STOXX, Ltd.)
In April 2020, the firm became the
first asset manager to launch two actively managed,
semi-transparent exchange traded funds utilizing Precidian
Investments' ActiveShares methodology: American Century Focused
Dynamic Growth ETF (FDG) and American Century Focused Large Cap
Value ETF (FLV). In July, American Century launched two active
Environmental, Social and Governance ETFs, American Century
Sustainable Equity ETF (ESGA) and American Century Mid Cap Growth
Impact ETF (MID) utilizing the New York Stock Exchange (NYSE)
Actively Managed Solution, the first-time use of the new active ETF
structure.
American Century Investments is a leading global asset manager
focused on delivering investment results and building long-term
client relationships while supporting research that can improve
human health and save lives. Founded in 1958, American Century
Investments' 1,400 employees serve financial professionals,
institutions, corporations and individual investors from offices in
New York; London; Hong
Kong; Frankfurt;
Sydney; Los Angeles; Mountain View, Calif.; and Kansas City, Mo. Jonathan S. Thomas is president and chief
executive officer, and Victor Zhang
serves as chief investment officer. Delivering investment results
to clients enables American Century Investments to distribute over
40 percent of its dividends to the Stowers Institute for Medical
Research, a 500-person, non-profit basic biomedical research
organization. The Institute owns more than 40 percent of American
Century Investments and has received dividend payments of
$1.7 billion since 2000. For more
information about American Century Investments, visit
americancentury.com.
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
americancentury.com, contains this and other information about the
fund, and should be read carefully before investing.
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.
QCON: Convertible securities are typically bond or debt
securities and preferred stock that may be converted into a
prescribed amount of common stock or other equity security of the
issuing company at a particular time and price. The value of
convertible securities may rise and fall with the market value of
the associated common stock or, like a debt security, vary with
changes in interest rates and the credit quality of the company
issuing the bond or security. A convertible security tends to
perform more like a stock when the associated common stock price is
high relative to the conversion price and more like a debt security
when the associated common stock price is low relative to the
conversion price.
Generally, as interest rates rise, the value of the securities
held in the fund will decline. The opposite is true when interest
rates decline.
QPFF: Preferred securities combine some of the characteristics
of both common stocks and bonds. Preferred securities may receive
preferential treatment compared to common stock regarding
dividends, but they are typically subordinated to a company's other
debt which subjects them to greater credit risk. Generally, holders
of preferred securities have no voting rights. A company
issuing preferred securities may defer dividend payments on the
securities and may redeem the securities prior to a specified date.
Preferred securities may also be substantially less liquid than
other securities and may have less upside potential than common
stock.
Floating rate securities are structured so that the security's
coupon rate or the interest paid on a bond fluctuates based upon a
reference rate. In a falling interest rate environment, the coupon
on floating rate securities will generally decline, causing a
reduction in the fund's income. A floating rate security's coupon
rate resets periodically according to the terms of the security. In
a rising interest rate environment, floating rate securities with
coupon rates that reset infrequently may lag behind the changes in
market interest rates. Floating rate securities may also contain
terms that impose a maximum coupon rate the company issuing the
security will pay, therefore decreasing the value of the
security.
Concentrating investments in a particular industry or group of
industries gives the fund greater exposure than other funds to
market, economic and other factors affecting that industry or group
of industries. The financials sector can be significantly affected
by changes in interest rates, government regulation, the rate of
defaults on corporate, consumer and government debt, and the
availability and cost of capital.
International investing involves special risks, such as
political instability and currency fluctuations. Investing in
emerging markets may accentuate these risks.
LVOL: There is no assurance that the fund will be less volatile
than the market over the long term or for any specified period. The
fund's strategy of constructing a portfolio that realizes lower
volatility than the market may not produce the intended result. A
security's volatility can change very quickly, and specific
securities in the fund's portfolio may become more volatile than
expected. Additionally, low volatility investments may underperform
the equity markets during periods of strong, rising or speculative
equity markets.
These funds (QCON, QPFF, LVOL, FDG, FLV, ESGA and MID) 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.
Because the shares are traded in the secondary market, a broker
may charge a commission to execute a transaction in shares, and an
investor also may incur the cost of the spread between the price at
which a dealer will buy shares and the somewhat higher price at
which a dealer will sell shares.
1 iSTOXX® American
Century® USA Quality Value Index is the intellectual
property (including registered trademarks) of STOXX Limited,
Zurich, Switzerland ("STOXX"),
Deutsche Börse Group or their licensors, which is used under
license. American Centuryâ STOXX U.S. Quality Value ETF is neither
sponsored nor promoted, distributed or in any other manner
supported by STOXX, Deutsche Börse Group or their licensors,
research partners or data providers and STOXX, Deutsche Börse Group
and their licensors, research partners or data providers do not
give any warranty, and exclude any liability (whether in negligence
or otherwise) with respect thereto generally or specifically in
relation to any errors, omissions or interruptions in the iSTOXXâ
American Century â USA Quality
Value Index or its data.
Important Disclosures – FDG, FLV, MID and ESGA
FDG, FLV, MID and ESGA are different from traditional
ETFs.
Traditional ETFs tell the public what assets they hold each
day. These ETFs will not. This may create additional risks for your
investment. For example:
- You may have to pay more money to trade the ETFs' shares.
These ETFs will provide less information to traders, who tend to
charge more for trades when they have less information.
- The price you pay to buy ETF shares on an exchange may not
match the value of the ETF's portfolio. The same is true when you
sell shares. These price differences may be greater for these ETFs
compared to other ETFs because it provides less information to
traders.
- These additional risks may be even greater in bad or
uncertain market conditions.
- MID and ESGA will publish on their 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 these ETFs and other ETFs may also
have advantages. By keeping certain information about the ETFs
secret, these ETF may face less risk that other traders can predict
or copy its investment strategy. This may improve the ETFs'
performance. If other traders are able to copy or predict the ETFs'
investment strategy, however, this may hurt the ETFs'
performance.
For additional information regarding the unique attributes
and risks of these ETFs, see the additional risk discussion at the
end of this material.
FDG and FLV are actively managed ETFs that do not
seek to replicate the performance of a specified index.
This fund may invest in a limited number of companies, which
carries more risk because changes in the value of a single company
may have a more significant effect, either negative or positive on
the fund's value.
Because the shares are traded in the secondary market, a broker
may charge a commission to execute a transaction in shares, and an
investor also may incur the cost of the spread between the price at
which a dealer will buy shares and the somewhat higher price at
which a dealer will sell shares.
The Verified Intraday Indicative Value - Unlike
traditional ETFs, the fund does not tell the public what assets it
holds each day. Instead, the fund provides a verified
intraday indicative value (VIIV), calculated and disseminated every
second throughout the trading day by the Cboe BZX Exchange, Inc.
(Listing Exchange) or by market data vendors or other information
providers. It is available on websites that publish updated
market quotations during the trading day, by searching for the
fund's ticker plus the extension .IV, though some websites require
more unique extensions. For example, the VIIV can be found on
Yahoo Finance (https://finance.yahoo.com) by typing "^FLV-IV" (for
Focused Large Cap Value ETF) or "^FDG-IV" (for Focused Dynamic
Growth ETF) in the search box labeled "Quote Lookup." The
VIIV is based on the current market value of the securities in the
fund's portfolio on that day. The VIIV is intended to provide
investors and other market participants with a highly correlated
per share value of the underlying portfolio that can be compared to
the current market price. To calculate the VIIV, the fund
employs two separate calculation engines to provide two
independently calculated sources of intraday indicative values
(calculation engines). The fund then uses a pricing verification
agent to continuously compare the data from both the calculations
engines on a real time basis. If during the process of real
time price verification, the indicative values from the calculation
engines differ by more than 25 basis points for 60 consecutive
seconds, the pricing verification agent will alert the advisor, and
the advisor will request that the Listing Exchange halt trading of
the fund's shares until the two indicative values come back into
line. This "circuit breaker" is designed to prevent the VIIV
from reflecting outlier prices. The specific methodology for
calculating the fund's VIIV is available on the fund's website.
Portfolio Transparency Risk – The VIIV is intended to
provide investors with enough information to allow for an effective
arbitrage mechanism that will keep the market price of the fund's
shares trading at or close to the underlying net asset value (NAV)
per share of the fund. There is, however, 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. Similarly, because the fund's shares trade on the
basis of a published VIIV, they may trade at a wider bid/ask spread
than shares of ETFs that publish their portfolios on a daily basis,
especially during periods of market disruption or volatility, and
therefore, may cost investors more to trade. Although the
fund seeks to benefit from keeping its portfolio information
secret, some market participants may attempt to use the VIIV to
identify the 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. The fund's website will contain a historical
comparison of each business day's final VIIV to that business day's
NAV.
Early Close / Trading Halt Risk – Trading in fund shares
on the Listing Exchange may be halted in certain
circumstances. An exchange or market may close early or issue
trading halts on portfolio securities. In times of market
volatility, if trading is halted in some of the securities that the
fund holds, there may be a disconnect between the market price of
those securities and the market price of the fund. In
addition, if at any time the securities representing 10% or more of
the fund's portfolio become subject to a trading halt or otherwise
do not have readily available market quotations, the fund's advisor
will request the Listing Exchange to halt trading on the fund,
meaning that investors would not be able to trade their
shares. Also, if there is a circuit breaker event, as
described above, the fund's advisor will request the Listing
Exchange to halt trading. During any such trading halt, the
VIIV would continue to be calculated and disseminated. Trading
halts may have a greater impact on the fund than traditional ETFs
because of its lack of transparency. Additionally, the fund's
advisor monitors the bid and ask quotations for the securities the
fund holds, and, if it determines that such a security does not
have readily available market quotations (such as during an
extended trading halt), it will post that fact and the name and
weighting of that security in the fund's VIIV calculation on the
fund's web site. This information should permit market participants
to calculate the effect of that security on the VIIV calculation,
determine their own fair value of the disclosed portfolio security,
and better judge the accuracy of that day's VIIV for the
fund. An extended trading halt in a portfolio security could
exacerbate discrepancies between the VIIV and the fund's NAV.
Authorized Participant / Authorized Participant
Representative Concentration Risk – The fund issues and redeems
shares that have been aggregated into blocks of 5000 shares or
multiples thereof (Creation Units) to authorized participants who
have entered into agreements with the fund's distributor.
(Authorized Participants). The creation and redemption
process for the fund occurs through a confidential brokerage
account (Confidential Account) with an agent, called an AP
Representative, on behalf of an Authorized Participant. Each
day, the AP Representative will be given the names and quantities
of the securities to be deposited, in the case of a creation, or
redeemed, in the case of a redemption (Creation Basket), allowing
the AP Representative to buy and sell positions in the portfolio
securities to permit creations or redemptions on the Authorized
Participant's behalf, without disclosing the information to the
Authorized Participant. The fund may have a limited number of
institutions that act as Authorized Participants and AP
Representatives, none of which are obligated to engage in creation
or redemption transactions. To the extent that these
institutions exit the business or are unable to proceed with
creation and/or redemption orders with respect to the fund and no
other Authorized Participant is able to step forward to process
creation and/or redemption orders, fund shares may trade at a
discount to NAV and possibly face trading halts and/or
delisting. This risk may be more pronounced in volatile
markets, potentially where there are significant redemptions in
ETFs generally. The fact that the fund is offering a novel and
unique structure may affect the number of entities willing to act
as Authorized Participants and AP Representatives. During
times of market stress, Authorized Participants may be more likely
to step away from this type of ETF than a traditional ETF.
MID and ESGA are actively managed ETFs that
do not seek to replicate the performance of a specified index.
MID 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.
A strategy or emphasis on environmental, social and governance
factors ("ESG") may limit the investment opportunities available to
a portfolio. Therefore, the portfolio may underperform or perform
differently than other portfolios that do not have an ESG
investment focus. A portfolio's ESG investment focus may also
result in the portfolio investing in securities or industry sectors
that perform differently or maintain a different risk profile than
the market generally or compared to underlying holdings that are
not screened for ESG standards.
Proxy Portfolio Risk–The goal of the Proxy Portfolio is,
during all market conditions, to track closely the daily
performance of the Actual Portfolio and minimize intra-day
misalignment between the performance of the Proxy Portfolio and the
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.
- The Proxy Portfolio methodology
is novel and not yet proven as an effective arbitrage mechanism.
The effectiveness of the Proxy Portfolio as an arbitrage mechanism
is contingent upon, among other things, the fund's factor model
analysis creating a proxy portfolio that performs in a manner
substantially identical to the performance of the fund's actual
portfolio. While the Proxy Portfolio may include some of the fund's
holdings, it is not the fund's Actual Portfolio. 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). If the
Tracking Error becomes large, there is a risk that the performance
of the Proxy Portfolio may deviate from the performance of the
Actual Portfolio.
- The fund's Board of Trustees
monitors its Tracking Error and bid/spread. If deviations become
too large, the Board will consider the continuing viability of the
fund, whether shareholders are being harmed, and what, if any,
corrective measures would be appropriate. See the Statement of
Additional Information for further discussion of the Board's
monitoring responsibilities.
- 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 –Publication of the Proxy Portfolio
is not the same level of transparency as the publication of the
full portfolio by a fully transparent active ETF. 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. This means the price paid to buy shares on an exchange
may not match the value of the fund's portfolio. The same is true
when shares are sold.
Trading Issues Risk –If securities representing 10% or
more of the fund's Actual Portfolio do not have readily available
market quotations, the fund will promptly request that the Exchange
halt trading in the fund's shares. Trading halts may have a greater
impact on this fund compared to other ETFs due to the fund's
nontransparent structure. If the trading of a security held in the
fund's Actual Portfolio is halted, or otherwise does not have
readily available market quotations, and the Advisor believes that
the lack of any such readily available market quotations may affect
the reliability of the Proxy Portfolio as an arbitrage vehicle, or
otherwise determines it is in the best interest of the fund, the
Advisor promptly will disclose on the fund's website the identity
and weighting of such security for so long as such security's
trading is halted or otherwise does not have readily available
market quotations and remains in the Actual Portfolio.
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. To the
extent that these institutions exit the business or are unable to
proceed with creation and/or redemption orders with respect to the
fund and no other authorized participant is able to step forward to
process creation and/or redemption orders, fund shares may trade at
a discount to net asset value (NAV) and possibly face trading halts
and/or delisting. This risk may be more pronounced in volatile
markets, potentially where there are significant redemptions in
ETFs generally. 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.
Actively Managed SolutionSM, AMSSM is a
service mark of NYSE Group, Inc. or its affiliates ("NYSE") and has
been licensed for use by American Century Investment Management,
Inc. ("Licensee") in connection with American Century Sustainable
Equity ETF and American Century Mid Cap Growth Impact ETF (the
"Funds"). Neither Licensee nor the Funds are sponsored,
endorsed, sold or promoted by NYSE. NYSE makes no
representations or warranties regarding Licensee or the Funds or
the ability of the AMSSM to track the intra-day
performance of any fund.
NYSE MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY
EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS
FOR A PARTICULAR PURPOSE WITH RESPECT TO AMSSM OR ANY
DATA INCLUDED THEREIN. IN NO EVENT SHALL NYSE HAVE ANY
LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL
DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE
POSSIBILITY OF SUCH DAMAGES.
Foreside Fund Services, LLC, Distributor, not
affiliated with American Century Investment Services, Inc.
©2021 American Century Proprietary Holdings, Inc. All rights
reserved.
Contact: Laura Kouri
(816) 516-7729
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SOURCE American Century Investments