Market Overview

American Century Pares Fee On Active Corporate Bond ETF

American Century Pares Fee On Active Corporate Bond ETF

It's just 18 months old, but the American Century Diversified Corporate Bond ETF (NYSE: KORP) is already getting a lower fee.

Effective June 14, KORP's annual expense ratio was trimmed to 0.29%, or $29 on a $10,000 investment, from 0.45%.

What Happened

As of June 14, the actively managed corp had nearly $63 million in assets under management. While there are passively manged corporate bond funds, including exchange traded funds, with lower fees, KORP's new expense ratio compares favorably with broader universe of actively managed corporate bond funds.

“With KORP now exceeding $60 million and attracting steady flows, we decided to reduce the fees in order to provide better value to investors," said Edward Rosenberg, senior vice president and head of ETFs for American Century Investments, in a statement.

Why It's Important

KORP is primarily an investment-grade debt ETF, but it can feature some exposure to junk bonds as part of its actively managed, dynamic allocation strategy. Typically, passively managed corporate bond ETFs feature exposure to investment-grade or junk bonds, not both.

KORP holds nearly 110 bonds and “screens individual credits to seek those with sound fundamentals, reduced default risk, attractive valuations and liquidity,” according to American Century.

With an option-adjusted duration of 4.13 years, KORP is considered an intermediate-term fund and it looks to beat the Bloomberg Barclays U.S. Intermediate Corporate Bond Index.

What's Next

Investors have been embracing KORP in the second quarter. At the end of March, the fund had just $37.3 million in assets under management. At that time, 86.62% of KORP's holdings were rated A or BBB and 84.51% of the bonds in the fund carried investment-grade ratings.

KORP is up 4.83% year to date and has a 30-day SEC yield of 3.09%.

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