Growth Unleashed: Preferred Stocks, CLO Strategies, and Companies Redefining Tomorrow’s Economy

Welcome to the program. I'm Thalia Hayden. It's great to have you with us. For over a decade, US stocks stole the spotlight, dominating portfolios, headlines, and returns. But the tide is shifting. International markets are stepping back into the ring, armed with better valuations, improving fundamentals, and currencies finally working in their favor.

After a long wait, global diversification suddenly looks smart again. This isn't about abandoning America. It's about expanding your opportunity set. That's where Advisor's asset management steps in. Their ETF lineup spans everything from international stocks to low duration preferred to quality growth strategies which are subadvised by specialists with deep domain expertise. Here to elaborate is the managing director and head of ETF product at Advisor Asset Management, Lance McRae. Thanks for joining us, Lance.

Yeah, thanks for having me. All right, let's start with the hot performers, international stocks. Many investors are still missing out because of home country bias. One potential solution for overseas exposure is the AAM Todd International intrinsic value ETF, ticker TIV. What makes this ETF a compelling solution?

Well, I think you're spot on here, right? You know, you mentioned earlier about home bias investing, right? And home bias investing has been something that US-based investors have dealt with forever, quite honestly. But I would also throw in recency bias to the mix as well, right? If you think about it, between 2014 and 2024, the S&P 500 outperformed the Acme XXUS index by nearly 200%. If you think about it, that's 8% per year for nearly a decade.

So, it's not hard to think and understand why international equities have sort of been out of favor or not been thought about by US investors. But the good news is, as you said, the times are changing and as we head into 2026, while many folks are talking about equal weight outperforming and the broadening of the market and how Russell 2 is outperforming Russell one, this is a great opportunity to take a step back and say listen, the broadening of the equity market is not just domestic, it's international as well. And quite honestly, I don't think you have to go too far to see that.

In fact, it started over a year ago. In 2025, the Aquex XUS outperformed the S&P 500, returning 32%. That's 15% more than the S&P 500. So, people are starting to catch on. And the question, as you kind of alluded to, is how do you capitalize on that? And that's where the ETF that you mentioned, the AAM Todd, intrinsic value ETF, really comes into play. Because at AAM we think about when you're trying to tap into international markets, it's finding the expertise of an active manager, you know, and then also one that has a really successful track record.

And that's what we have here with TIIV and Todd Asset Management. We have a firm that's has a 30 plus year track record manning international equities. You know, in fact, this same strategy that TIIV is built off of has been in the marketplace for 20 plus years as an SMA. So when you look at performance, you can look at the composite performance of that strategy and see 1 3 5 10 since inception, it has outperformed its peers and its benchmark for that time frame. So really excited about that product.

It's really a valuation. It's a proprietary system built by Todd Asset Management. And when we take a step back even further, you know, we look at the backdrop in the macro environment for international equities. We look at valuations and global monetary easing and currency tailwinds and AI 2.0. And we think we're just in sort of the beginning phases of the secular bull strategy or bull market for international equities. And we think TIIV is a great place for investors to sort of park some assets that are looking to increase their international exposure and a very durable, a very proven international manager and strategy.

Got it. The AAM Transformers ETF, ticker TRFM, recently garnered a five-star rating from Morning Star in the highly competitive global large stock growth category. Congratulations on that. What contributed to TRFM's track record of success and what distinguishes it from other traditional growth equity ETFs?

Yeah, well, first off, again, thank you five stars. It's, you know, it's always great to have a five-star product on the lineup. We're super excited about that and you know, the performance has been fantastic. But first and foremost, you know, Transformers, TRFM, is built to capture these sort of companies, you know, driving major technological and behavioral transformations worldwide. It's a rules-based strategy.

It follows the Pence Transformers index, which again is a index designed to hold US equities and listed ADRs that are really positioned to benefit from significant disruption in technological innovation. Right? when we think about these types of I don't want to say nichy but thematic type strategies, you know, they're often one-off right it's either robotics or AI or cyber security or some other type of nichy thematic strategy and what you get with transformers is a strategy that really brings it all together. We're talking AI cloud infrastructure semiconductors robotics aerospace innovation and next generation industrial technology technologies, right?

So, it's a strategy that's really built around R&D focus, right? If you're spending a lot of money, chances are you're going to either be do something very very good, find something and spending a lot of money on R&D or you're small and you do something very well and then you get acquired by larger companies. So, it's a revolving door and that's what we try to capture with TRFM and its under underlying index. Now, I will say like many of these strategies that TRFM goes up against in the global growth growth category, it does have a large allocation to technology, right?

Nearly 53%. And I think you would assume that. But what's also interesting, it has 23% exposure to to industrials as well. So, you're getting diversification, right? We you mentioned it. This is the time for diversification. We mentioned it international exposure and diversification. Transformers does that here as well. You know, nearly 25% of the exposure in Transformers is sort of positioned to non US domestic equities through the ADR.

So, you're getting international exposure, you're getting US exposure, and you're getting companies that are really transforming the world behind us. And lastly, when you talk about Transformers, coming back to the five-star, obviously you can't get a five-star per star, five-star rating from Morning Star without having fantastic risk adjusted returns. And you know, I'm certainly happy to report that TRFM has returned, you know, over the last 3 years nearly 29%. Uh, which is really spectacular and currently we're in the fourth percentile of our morning star category.

So super exciting times for transformers for those investors that are looking to sort of diversify their large cap growth allocation. It holds over 250 names and most importantly when you think about those performance numbers that I just mentioned no security in TRFM is over 105 basis points. So 1.05% allocation. So you're really getting diversification with the strategy.

Tradition preferred stock ETFs often carry significant interest rate risk due to their long-term nature. Given the current interest rate environment, how does the AAM low duration preferred and income securities ETF ticker PLD balance risk while still aiming for attractive yield income?

Yeah, PFLD is really, you know, has been our flagship for a number of years. You know, as many folks know, AAM is built off of income, whether it be dividends in the equity space or coupons in the fixed income space. You know, PFLD was the first low duration product, you know, in the preferred asset class in the marketplace and today has over $450 million in assets.

It's a product that, you know, we think is really unique in the marketplace mainly because of what you alluded to. It's a strategy that provides you know allocation that has you know relatively low correlation to traditional stocks and bond portfolios low beta but it also provides high high income right through the hybrid and preferred securities market. But what we try to do is to do something that's really important in this type of environment where while we expect a few rate cuts in 2026, we also expect a lot of volatility.

And unfortunately, those investors that rely on the preferred asset class to gain income, they often don't realize the amount of duration risk they take on by investing in these securities because these are longerdated securities. They can be impacted quite a bit by interest rate moves up or down and and also volatility. So when we created PLD and the underlying index for PFLD it was really capturing the asset class capturing the benefits of the preferred and hybrid asset class.

So we're talking low correlation, diversification, capital potential for capital appreciation, high income, tax efficient income. But doing it in a way that's much less risky. And we do that by the underlying index removes all securities that have effective duration of 5 years or more, which again tones down the duration, so you have less interest rate sensitivity. But also we remove securities on a monthly basis from the portfolio that have we have a call screen.

So if a security is trading north of 105% of face value, that security is automatically removed from the underlying index and therefore removed from...