American Century launches securitized credit ETF

American Century Investments has launched the American Century Securitized Credit ETF (ASEC), an actively managed fund that invests in U.S. securitized debt to pursue income and diversification. The firm described the ETF as focused on asset-backed securities, mortgage-backed securities and collateralized loan obligations.

A firm release stated that ASEC will target what American Century called underrepresented asset-backed securities and other securitized subsectors, in addition to residential and commercial mortgage-related paper and CLOs. The firm said the fund is designed to complement core bond holdings by offering an alternative source of income and a different exposure than corporate credit.

As an actively managed ETF, ASEC gives managers flexibility to change holdings in response to market conditions instead of tracking a fixed index. American Century said the strategy aims to manage duration and credit risk relative to similarly rated corporate bonds while seeking higher income.

Paul Norris, senior portfolio manager, and Michael Waggaman, portfolio manager, will co-manage the fund. In the release Norris said, “Investors seeking income and diversification are looking beyond traditional corporate credit and we’re eager to provide a low-cost offering that applies our active management expertise to high-quality securitized credit through a disciplined process. ASEC pairs fundamental expertise with proprietary analytics and active risk management in an effort to capture market inefficiencies and offer a differentiated return profile, positioned to outyield similarly rated corporates while maintaining lower duration and strong credit quality.”

American Century manages about $300 billion in assets. The firm’s fixed income lineup already includes the American Century Diversified Corporate Bond ETF (KORP), which holds just over $800 million. The company said ASEC expands its active fixed income choices for investors seeking exposure to non-traditional fixed income sources.

Securitized credit refers to debt instruments backed by pools of loans or receivables. Examples include ABS backed by auto loans, credit cards or equipment receivables; residential and commercial MBS backed by mortgage payments; and CLOs that bundle leveraged loans. Cash flows for these securities depend on the performance of the underlying loans or collateral, which affects their income and risk profiles compared with traditional corporate bonds.

American Century said the new ETF is intended to be a lower-cost option within its product lineup and to apply the firm’s fundamental research and risk-management capabilities to the securitized-credit sector. ASEC’s introduction adds another active ETF for investors seeking exposure to securitized credit.