Semi-Transparent ETFs
American Century has five existing ETFs, all of which were introduced in 2018. Two are actively managed fixed-income products and three are passive equity funds categorized as intelligent beta products. They collectively have $162.3 million in assets, and their expense ratios range from 0.29% to 0.45%.
Three of these products—the American Century STOXX U.S. Quality Growth ETF (QGRO), American Century Quality Diversified International ETF (QINT) and American Century Diversified Municipal Bond ETF (TAXF)—have outperformed their indexes and categories year-to-date, while the American Century STOXX U.S. Quality Value ETF (VALQ) and American Century Diversified Corporate Bond ETF (KORP) have underperformed.
In addition to its upcoming lineup of Avantis funds, American Century in May filed for exemptive relief for actively managed, semi-transparent ETFs that will use Precidian Investments' ActiveShares structure to create funds that disclose their holdings on a quarterly basis like mutual funds do. Traditional ETFs disclose their holdings on a daily basis.
The ActiveShares structure has been licensed by a number of leading asset management firms who have been reluctant to put their active investment strategies in an ETF format with daily disclosures because they fear sophisticated investors will front-run their trades and copy their proprietary strategies.
American Century’s application for exemptive relief is still being reviewed by the SEC. It is expected that ETFs from various fund sponsors that employ the ActiveShares methodology will launch sometime this year.