First to Launch Semi-Transparent Active ETFs
American Century Investments is the first asset manager to launch two actively managed, semi-transparent exchange traded funds (ETFs) utilizing Precidian Investments' ActiveShares® methodology: American Century® Focused Dynamic Growth ETF (FDG)*,1 and American Century® Focused Large Cap Value ETF (FLV)*,1.
The semi-transparent structure will allow American Century Investments to deliver its actively managed investment strategies in an ETF vehicle, without the daily holdings disclosure requirement of fully transparent ETFs. The funds will be available exclusively through Cboe BZX Exchange with Citadel Securities, LLC as the lead market maker, serviced by State Street, which is both Authorized Participant Representative (APR) and custodian, and with IHS Markit as the verified intraday indicative value (VIIV) calculator.
This ETF is different from traditional ETFs.
Traditional ETFs tell the public what assets they hold each day. This ETF will not. This may create additional risks for your investment. Specifically:
You may have to pay more money to trade the ETF's shares. This ETF 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 this ETF 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 differences between this ETF and other ETFs may also have advantages. By keeping certain information about the ETF secret, this ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETF's performance. If other traders are able to copy or predict the ETF's investment strategy, however, this may hurt the ETF'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.
"We're pleased to be the first firm to offer semi-transparent active ETFs to our clients," said Jonathan Thomas, American Century Investments' chief executive officer. "Our goal at American Century Investments has long been providing active management solutions that meet their evolving needs."
Precidian's ActiveShares® structure seeks to combine the most beneficial aspects of the traditional mutual fund with the efficiencies and flexibilities of an ETF. Precidian's patented 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.
"This new type of ETF gives American Century one of the most diverse platforms in the industry and allows us to introduce products with our unique insights," said Edward Rosenberg, head of ETFs for the firm.
Focused Dynamic Growth (FDG) invests in stocks of early and rapid stage large-cap growth companies with the potential to increase in value over time. The fund is managed by Keith Lee, senior vice president and senior portfolio manager; Michael Li, vice president and senior portfolio manager; Prabha Ram, portfolio manager, Henry He, portfolio manager and Rene Casis, ETF portfolio manager.
Focused Large Cap Value (FLV) invests in large-cap, high-quality companies the managers believe are temporarily selling at a discount. The fund is managed by Phillip Davidson, senior vice president and executive portfolio manager; Brian Woglom, vice president and senior portfolio manager, Phil Sundell, portfolio manager, Kevin Toney, chief investment officer, Global Value Equity and senior portfolio manager, Michael Liss, vice president and senior portfolio manager and Rene Casis, ETF portfolio manager.
The firm has been at the leading edge of embracing ETF structures fostering the delivery of semi-transparent active solutions. In May of 2019, American Century, which launched its first ETFs in January 2018, was the first asset management firm to file for exemptive relief to utilize Precidian's ActiveShares methodology.
The Focused Dynamic Growth and Focused Large Cap Value ETFs join American Century's ETF suite comprised of American Century® Diversified Corporate Bond ETF (KORP), American Century® Diversified Municipal Bond ETF (TAXF), American Century® Quality Diversified International ETF (QINT), American Century® STOXX® U.S. Quality Growth ETF (QGRO)2 and American Century® STOXX® U.S. Quality Value ETF (VALQ)2.
Separately, American Century rolled out a series of ETFs in September 2019 through Avantis Investors, whose low-cost, diversified investment solutions are designed to fit seamlessly into investors' asset allocations. The five Avantis Investors ETF are Avantis International Small Cap Value ETF (AVDV), Avantis International Equity ETF (AVDE), Avantis Emerging Markets Equity ETF (AVEM), Avantis U.S. Equity ETF (AVUS) and Avantis U.S. Small Cap Value ETF (AVUV).
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.
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.
There is no guarantee the investment strategies will be successful. Investing involves risk including the possible loss of principal.
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.
The fund is an actively managed ETF that does 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. 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.
Early Close / Trading Halt Risk: Trading in fund shares on the Listing Exchange may be halted in certain circumstances. Trading halts may have a greater impact on the fund than traditional ETFs because of its lack of transparency. 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 in Creation Units to 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. 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. 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.
iSTOXX® and STOXX® are registered trademarks of STOXX Ltd.
The STOXX® 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. The fund 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 STOXX® Index or its data.
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 avantisinvestors.com or calling 1-833-928-2684, 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): Foreside Fund Services, LLC - Distributor, not affiliated with American Century Investment Services, Inc.
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