American Century Talks Concentration, International Equities on Prime

Headlines from recent weeks can sometimes induce investor whiplash. Yes, bond panic is the latest storm cloud to loom over markets, amid concentration risk and the ongoing Hormuz crisis. However, at the same time, clients still want to get exposure to exciting equities opportunities. The most recent episode ETF Prime included new insight on these dynamics from American Century Investments head of ETF product and strategy Sandra Testani.Key Takeaways: American Century’s Sandra Testani joined ETF Prime host Nate Geraci to talk ETFs and the market. As concentration risk looms, investors may want to consider funds like QGRO and QINT for their quality focus and weights. Testani’s insights may speak to investors’ interest in funds that can serve those roles. Hosted by Nate Geraci, ETF Prime offers listeners the opportunity to hear directly from key thinkers in the ETF landscape. Testani, who joined the firm eleven years ago, offered some insight into the state of the firm, having launched its first ETFs in 2018. She pointed to the firm’s history in active ETFs since then as an important marker. “If you can believe it at the time, the entirety of the active ETF universe at that time was $50 billion with a B,” Testani recalled. “We’re proud to say that we are the fourth largest issuer of active ETFs in the US.” The firm, Geraci said in its introduction, offers 49 ETFs across American Century Investments and Avantis Investors brands. The shop has nearly $160 billion in AUM, he said, with about $40 billion in YTD inflows. Testani explained those flows as driven by American Century’s particular appeal, offering flexible strategies and focusing on funds as building blocks. The firm does that rather than chase the latest “new toys” in the ETF space. “I think (the flows) would probably fall into two very broad categories. And the first is, ‘how do I maybe for the first time in some time, look to diversify and make sure that I have the appropriate diversification within my equity allocation?’” Testani said. “And the second one, probably not surprising, even given this morning’s news, is how to navigate the very uncertain fixed income landscape that we’re facing today.”American Century ETFs, Concentration Risk, and MoreOn the topic of news and the current state of the markets, Geraci invited Testani to share her thoughts. Testani spoke to that ongoing appeal for artificial intelligence stocks and how that pairs with conversations about concentration risk. “I think it’s hard to say when US equities are up 13% after several strong years that this is a bad environment,” she said. “But you know, the fact that ten stocks represent 40% of the S&P 500 index, or ten stocks represent 60% of the Russell 1000 growth. It’s got some people concerned. While earnings have been supportive of that, she added, it has prompted conversations about growth and growth allocations. American Century Investments offers growth solutions that keep investors exposed to growth stocks but in a more diversified, quality manner. That fund, the American Century U.S. Quality Growth ETF (QGRO B), charges a 29 basis point (bps) fee to offer that approach. Testani explained that its 3.5% weight cap on individual stocks helps it do well as markets broaden and hold up if the big names pull back.International Equities and QINTOutside of the U.S., however, international equities also offer that important diversification. Geraci set the stage pointing out that international equities have outperformed relative to U.S. equities since the start of last year. Testani pointed out that while investors don’t want to try to time markets, diversification proved to help portfolios in that time. “By only investing in the US, you’re sort of adding a constraint in portfolios (when) outside of the US you typically see more attractive valuations,” she said. “Not a timing decision again. But, you know, to the extent that you’re looking for that sort of value, it’s there. Profit growth is broadening.” See more: How International Equities ETF QINT Has Outperformed This YearOpportunities From American CenturySo, while investors had gone off of international equities following a long period of U.S. outperformance, international equities offer opportunities. American Century offers the American Century Quality Diversified International ETF (QINT B+) as an option therein. Charging 34 bps, the fund provides a similar quality focus to QGRO, emphasizing quality names, too. “What this strategy does is actually focus on high quality companies in developed international markets, creates a portfolio of high quality growth and high quality value, and then tilts depending on prevailing market environment,” Testani said. Both QGRO and QINT, together, offer strong options to diversify while also embracing equities. The pair of funds could make for solid additions in an uncertain landscape. Readers can hear more from Testani’s interview here. For more news, information, and analysis, visit the Core Strategies Content Hub. VettaFi LLC (“VettaFi”) is the index provider for QINT and QGRO for which it receives index licensing fees. However, QINT and QGRO are not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of QINT and QGRO.