asset_chaos wrote: ↑Fri Sep 24, 2021 7:28 pm
comeinvest wrote: ↑Fri Sep 24, 2021 6:13 pm
HurrDurrImaPilot wrote: ↑Fri Sep 24, 2021 1:34 pm
Anyone know if this is still on track for the 30th? Not very familiar with first day trading dynamics on ETFs so wondering if there are any considerations on avoiding until it settles out a bit.
Good question. Looks like many Bogleheads are having their hands on the trigger to shift their portfolios to AVES, waiting for the 30th to approach. Will there be any sellers? Maybe watch the discount/premium?
Will the new fund already have an existing portfolio on the first day, or are they buying it on and after inception?
Not in the business, so don't know precisely, but my guess is that American Century seeds the fund with some number of millions of dollars that they place with the authorized market makers who use the seed money to buy a few creation baskets worth of company stocks that go into the fund in exchange for shares of the ETF. Then the authorized market makers have an inventory of ETF shares ready to sell to initial buyers of the ETF in the open market. Only a guess, but, except for seed money coming from the ETF sponsor, that's more or less how the normal creation mechanism for ETFs works.
My plan is to wait a quarter to let any start up trading issues abate and to see what the portfolio characteristics are. Then if the factor characteristics look ok, I'll start to move gradually from DGS to AVES. I try to never be in a hurry to trade.
Keep in mind that American Century has its own ETFs in addition to those offered by its Avantis subsidiary. I do check the Assets Under Management for the various American Century ETFs and they are bringing in money, not like Avantis which has been a resounding success but still drawing in enough monies that the American Century ETFs are viable. A couple of things I am aware of that they are doing are starting up Blended Target Date Funds that mix Avantis ETFs with the more traditional American Century Mutual funds. They also have a Private Client Group that now has drawn almost 1.3 Billion in Assets (similar to Vanguard Personal Advisory Service) and Private Client Group customers have American Century ETFs in their portfolios. I am told that Private Client Group will start including Avantis ETFs in their portfolios but I haven't seen that yet in my own account.
So American Century is sort of competing with itself in the ETF arena and yet cooperating at the same time. For example, both American Century and Avantis offer a U.S. Value ETF and a Municipal Bond ETF, so you see the competition. Both Avantis is a subsidiary company and uses the American Century Infrastructure, here you see the cooperation. I am watching to see how this develops, American Century operates more Index based ETFs and Active ETFs, Avantis is running so-called factor funds which are sort of active but has hired talent from PIMCO to operate fixed income funds.
So you are seeing a bit of overlap here but each provider also is filling in certain niches.
American Century as a company can see the ETF trend, you can now have a 100% ETF portfolio at American Century/Avantis and skip the mutual funds entirely. What you will see is active management at a much lower price, I think you will see it offered at 20 basis points through the ETF platform. Not there yet, but you can see where this all is headed. I don't think the traditional mutual fund industry is going away but all the future growth in Assets Under Management will be in the ETF space, the mutual fund industry will see a very slow decline.
It appears that all of the recordkeeping for individual mutual fund accounts costs 9-12 basis points a year. Let the brokerage firms keep track of who owns what rather than having the asset management firms hire accountants and clerical people. This is why Vanguard is gradually offloading its clients to a brokerage platform and giving its clients an option to convert mutual funds to ETFs, not sure who they use as their brokerage platform.
A fool and his money are good for business.