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Ed Rosenberg, head of ETFs, speaks with Julie Cooling of RIA Channel at Schwab Impact about driving factors in today’s ever-changing market.
5 mins 24 secs
Julie Cooling: Hi, I'm Julie Cooling, founder of RIA channel and contributor with Forbes. I'm here with Ed Rosenberg, head of ETFs for American Century. Ed, thanks so much for being with me today.
Ed Rosenberg: Thank you for having me.
JC: So here the Schwab Impact Conference in San Diego a lots happening. There's a lot of discussion about the economy and then, of course, markets. What do you think that the drivers are going to be in 2020 for the stock market?
ER: So I think the driver is gonna be the same as this year; starting with. We have the Fed, right, and the decisions they make whether they lower rates, keep them where they are now that they've lowered them or do they start looking and going back up. We also have China, this deal with China. Will it ever get done, right? They just moved there, supposed to be assigning recently, and it just moved it back. And it's impacting the markets today. And is it the real deal they're trying to get done? Or is there gonna be 2nd, 3rd, and 4th phases and even the Chinese government's come out saying I don't know if we can get a deal with Trump in office, and I think those two things combined with a little bit lower earnings across the board and a slowing economy are actually in a create volatility for next year, just like they did this year. Even though we went out, there are days and periods. We've had a lot of volatility. I think we're going to see that next year until these things settle. And quite honestly, we have the impeachment hearings which are apparently gonna start shortly publicly. And what does that do to the economy and what does that do to the markets? I don't know if it'll do anything, because there's been so much noise already, but there is that sort of spectre hanging over. "Does that mean anything?"
JC: So from your perspective at American Century and specifically within the ETF world, why are the American Century Investment strategies important in terms of, versus typical beta strategies?
ER: So typical beta strategies. You get to ride those waves full up, full down, depending on what the market's doing. What our ETFs are doing is they adapt to market cycles, So just using our growth product is the example that goes between the GARP-style, growth at a reasonable price, and aggressive growth, and it shifts now tones always a bit of both, but it shifts the waiting's between one and the other, and our values cycle our value product, I mean. There's been talk that we're in this value market all of a sudden. We magically appeared in it, but it's been growing, and our product will shift between a value portfolio and a value style income portfolio just to give more stability. And as it shifts with market cycles, it can help you with those ups and downs of the market in the volatility we got, which you normally wouldn't get with just a basic index across because you're feeling the full effect of the market.
JC: So what, are you launching new ETFs any time soon?
ER: We will be. So we are one of the leaders among the semi-transparent structure, and as soon as that structure, the one that's leading the way is active shares, as soon as all the SEC approvals go through way should be able to launch. So those are the next products out there for us, and we're hoping by mid December That's a little wishful thinking, and I would suspect it'll be more early January early part of next year. So I think it's important that for badgers, that neighbor and familiar with the semi active, transparent ETFs, what they are, exactly how they're different from traditional gifts and why American Century's embrace this.
So let's start with how there to see it first, right to every adviser wants these come out. They're going to look, feel and behave exactly like an ETF. How are they different, right? One. You can't see the holdings every day. So with the active share structure as an example, there's no holdings to be seen right. But there isn't an iNav. I call it an iNav but the technical term is ViiV. But instead of being priced every 15 seconds, it's priced every second. So there is a value that the adviser can gain from that. And here's why that's important. It's only U. S. Securities, right? So equities, ADRs, Treasuries, and future U. S listed futures. So they're pricing the scene time that the securities in the basket are pricing and so you'll be able to get an inherent value from that and understand where your ETF should trade, and by doing that you have some hint and then there's us. We can publish portfolio characteristics so you know what it is. It's gonna be Large Cap, here's the dividend yield. Maybe here's the medium market cap and so you won't be totally in the dark.
So that's why it's semi-transparent. But it's gonna behave exactly like an ETF. And the benefit to the adviser is you can get strategies in that structure that just aren't offered today in ETFs. And they're actively managed, actively managed totally. So they're actively managing them every day. It's not being managed to in index, and it's not quarterly. It's literally. It could be every day, every single day. If so, the markets. Today we're taking a little bit of a dip. If there's a stock that is driving that that the portfolio managers feel is advantageous to add to the portfolio, they could be adding it right now and not wait for an index re-balance or whatever happens. Especially in volatile markets. Active, common, combining really active and passive within a portfolio is critical for advisers agree. I do agree. I mean, there's always a need for active. There's always a need for passive. And by putting them together in the right mix for your clients, you could actually achieve a better risk reward profile and a better outcome in these markets.
JC: Well, thank you so much for your insights today. Appreciate your time.
ER: Thank you for having me.
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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.