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By Rene Casis - April 10, 2019
Exchange-traded funds, or ETFs, as an investment vehicle have been around less than 30 years. Is that a long time, or just the blink of an eye? It probably depends on your age. But one thing we can all agree on is that 2018 was a milestone year for this strategy.
I'm often asked to prognosticate what the coming months—and year—have in store for ETF investors. My answer is simple: New products. Specifically, I foresee a range of new, actively oriented products. I also expect to see continued global growth, albeit on a much more muted pace than in previous years.
In this quarter's outlook video, I share details on anticipated ETFs performance and how advisors can address the implementation challenge.
Over the upcoming quarter, I think the ETF landscape is going to see newer products, and those new products are going to be much more actively oriented versus a traditional passive market cap weighted strategy.
Within the U.S., corporate profits and the stability of earnings yields are certainly top-of-mind of many investors. Whether or not the Fed (Federal Reserve) is going to implement further rate hikes is also something that's top-of-mind. Outside of the U.S., the trade relations with China and how that will get resolved is something that is impacting market activity. And then within Europe, how Brexit will ultimately be carried out in terms of the resolution plays out in how investors are positioning their portfolios.
That said, companies with stronger balance sheets and trending cash-flow yields will perform better than their peers. With how our portfolios are constructed, we're well-positioned for this type of environment.
There is an active element to decision-making at the very top level. When an investor decides to overweight the U.S. versus other countries in the world, whether an investor looks to tilt more towards value or more towards growth. All of those decisions, whether the strategy is a passive or an active strategy, is an active decision.
From where I sit at an asset management firm, with access to real-time prices and real-time information, to see how changing market conditions changes market pricing across many asset classes, is an advantage, I think, afforded to those in our profession. For advisors, who may not have ready access to this type of information, implementation is going to be a huge challenge.
One of the ways to overcome these challenges is to really think about the outcome the investor is looking to achieve, setting up a portfolio and constructing a strategy that best suits that desired outcome and ultimately remaining patient throughout the changing economic cycles.
Over the next three to six months, I am cautiously optimistic that global growth will continue to be positive, though at a much more muted pace than in previous years.
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Portfolio Managers Hitesh Patel and Rene Casis discuss preferred securities, outlining the potential benefits and risks of investing in an actively managed portfolio of preferreds.
Two of our portfolio managers explain how convertible bonds work and why investors should consider investing in these securities via actively managed ETFs.
NYSE’s Judy Shaw talks with Rene Casis, ETF Portfolio Manager, about our newly launched Low Volatility ETF – LVOL and its differentiated strategy among other low volatility products in the marketplace today.
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.
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 opinions expressed are those of American Century Investments (or the portfolio manager) and are no guarantee of the future performance of any American Century Investments' portfolio. This material has been prepared for educational purposes only. It is not intended to provide, and should not be relied upon for, investment, accounting, legal or tax advice.
References to specific securities are for illustrative purposes only, and are not intended as recommendations to purchase or sell securities. Opinions and estimates offered constitute our judgment and, along with other portfolio data, are subject to change without notice.
American Century Investments is not responsible for and does not endorse any comments, content, advertising, products, advice, opinions, recommendations or other materials on or available directly or via hyperlinks to third party applications or websites. Logos or icons used are registered trademarks of their respective owners.