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Thrivent Asset Management has officially stepped further into the ETF arena, converting two of its long-running mutual funds into exchange-traded products on Monday.
That move brings the firm’s small- and mid-cap value strategies to a market that’s been vacuuming up assets at a brisk pace.
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The Thrivent Small Cap Value ETF (NYSE:TSCV) and Thrivent Mid Cap Value ETF (NYSE:TMVE) started trading on Monday after converting from mutual funds. TSCV launches with $146.74 million in assets and a 0.60% expense ratio, while TMVE comes aboard with $19.88 million under management and an expense ratio of 0.55%.
Thrivent believes the shift offers investors access to its active stock-picking approach in a more tax-efficient wrapper. Both ETFs focus on undervalued companies showing improving business fundamentals and steady or rising returns on invested capital.
The small-cap ETF holds 61 stocks that are largely equal-weighted. The positions include Cushman & Wakefield Plc (NYSE:CWK) at 2.8%, Plymouth Industrial REIT Inc (NYSE:PLYM) at 2.6% and UMB Financial Corp (NASDAQ:UMBF) at 2.6%. The strategy looks for companies trading at less than 70% of estimated intrinsic value. Analysts look for businesses where upside potential is two to three times downside risk.
TMVE also employs a similar approach in the midcap arena. The portfolio consists of 81 names with M&T Bank Corp (NYSE:MTB) (2.7%), U.S. Bancorp (NYSE:USB) (2.6%) and Sysco Corp (NYSE:SYY) (2.2%) leading the list. Management focuses on companies with stable or improving return on invested capital, according to the prospectus and looks for opportunities via scenario-based valuation work.
Both strategies previously operated as open-end mutual funds available only to affiliated funds and carried no management fee, something that changes under the ETF structure.
Performance may differ going forward as a result, noted by Thrivent Mutual Funds President Mike Kremenak, who added that the firm’s long experience managing small- and mid-cap mandates now extends to its ETF shelf, offering investors more tools for building and diversifying portfolios.
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