The ETF Show - Exploring Actively Managed ETFs and Thrivent's SMID Cap Strategy
05 mins 25 secs
Hello and welcome to the ETF show. Joining us now to take a closer look at the small and mid-space is Chad Miller, senior portfolio manager at Thriven.
Great to have you with us to start off. What are some of the pros and cons of actively managed, semitransparent ETF s?
Yeah, great. And it's great to be here with you. So, the ETF structure provides us with tax efficiency, lower fees, and increased liquidity for investors. The semitransparent element to the product allows us to temporarily hide names to protect our proprietary view where we may be buying or selling in the marketplace. And the active management component allows us to leverage our existing fundamental expertise. To this. We add our proprietary ESG process, which is focused around stakeholder value, financial materiality, engagement with companies, and it helps us to identify risks and opportunities. On the risk side, we think that many companies who face an issue the root cause typically traces back to a topic in E,S or G. So having a framework to analyze these areas is helpful, and on the opportunity perspective, we know there is increasing in academic evidence. We know that executives and boards are very focused on these topics, and we know that human capital is becoming increasingly important. We don't have any sector exclusions or political or social views. It's strictly from the angle of trying to improve risk adjusted returns for our clients. And when we conduct this process, we're left with a portfolio of companies that have a strategy to outperform their peers and further sustainable business practices.
Chad. How can ETF managers deliver in the small and midcap asset classes, given the projected rebound of this space with the market cycle?
Yeah, that's a great question. So, we know the small and mid-cap space is an attractive area to invest in the marketplace. And in fact, if we look back over the past 30 years, Small and midcap Equities have the highest annualized return of any publicly traded asset class in the US, and this is due to a number of reasons. But a few of them are. These companies typically grow faster than the overall market. There is less focus from the broader investment community on small and mid-cap companies, enabling higher inefficiencies that we can take advantage of. These companies typically benefit from M and A. They have stronger shareholder bases and lower turnover, and they have a longer runway for growth and operational improvement. And so we know that these areas present an a track of backdrop for small and midcap investing. And it's also interesting to look at how this this asset class performs in a recovery. We know that small midcap stocks typically recover at a faster pace. So as we look at what's happening in the overall economy today, with the slowdown from higher rates, this is an attractive area to be positioned for the eventual recovery that comes in the markets.
What sets apart portfolio management teams in the ETF space?
So first of all, it is our deep and experienced research team. Here at Thrivent, we have dedicated analysts who have followed their sectors for a long time. They meet with the companies; they're out there going to trade shows and figuring out what is happening in these industries from the ground up. To that, we add our fundamental process that has been successful in our small and mid-cap space, and we integrate our ESG process again focused around stakeholder analysis, financial materiality and engagement with these companies. And then, finally, is our long term investment philosophy. So we are able to go in and figure out what our long term perspective is and hold those companies through the ups and downs and volatility of the short term to invest for long term success in our funds.
Building off of that. Could you share a little bit more about the fund and strategy?
Sure. So the thriving Small and midcap ESG ETF seeks to invest in companies that have a strategy to sustainably and successfully serve their primary stakeholders and also a strategy to outperform their peers. And so our team analyses how companies generate value for each of their primary stakeholders and combines a traditional bottom up fundamental investment research with in depth environmental, social and governance analysis.
Finally, where can we go to learn more about this fund?
You can visit our website at ThriventETFs.com, and the ticker is TSME.
Chad, thank you so much for joining us.
Thank you for having me.
And thank you for watching once again, that was Chad Miller, senior portfolio manager at Thrivent.
Chad Miller, Senior Portfolio Manager at Thrivent, discusses the benefits of actively managed, semi-transparent ETFs and Thrivent's Small-Mid Cap ESG ETF. Gain insights into their unique process that capitalizes on stakeholder value and commitment to sustainability.