Why Now is the Time to Rebalance into Mid-Cap Value with Thrivent's ETF Transition

As the U.S. equity market navigates a landscape of shifting trade policies, tariff volatility, and regulatory uncertainty, investors face a critical decision: where to position capital for resilience and growth. The Thrivent Mid Cap Value Fund's transition to an ETF in late 2025 offers a compelling entry point for investors seeking to rebalance into mid-cap value equities—a segment uniquely positioned to thrive amid policy turbulence. This article explores why the structural shift to an ETF, coupled with the fund's valuation advantages and sector-specific resilience, makes this a strategic opportunity to overweight mid-cap value now.

The ETF Transition: Liquidity Meets Value Investing

Thrivent's decision to convert its Mid Cap Value Fund (currently ticker TMCVX) into an ETF in Q4 2025 marks a strategic pivot toward accessibility and efficiency. The soft close date of August 4, 2025, signals an urgency for investors to act before the mutual fund closes to new investments. While the ETF's ticker remains undisclosed (as of June 19, 2025), the transition itself unlocks benefits:

1. Enhanced Liquidity: ETF structures allow intraday trading, enabling investors to exit positions more flexibly than traditional mutual funds.
2. Lower Costs: Though the mutual fund's net expenses are 0.90%, the ETF may reduce this further, aligning with industry trends toward cost efficiency.
3. Tax Efficiency: ETFs typically generate fewer capital gains distributions, improving after-tax returns for taxable accounts.

Valuation Advantages: Mid-Cap Value is Undervalued Relative to Growth

Mid-cap value stocks currently trade at a significant discount to growth peers. The Thrivent fund's portfolio has a P/E ratio of 15.86, far below the 25.20 P/E of the S&P 500® Index (as of May 30, 2025). This valuation gap is widening as growth stocks face headwinds from rising rates and slower innovation adoption.

The fund's sector diversification—including Financials (19.47%), Industrials (16.02%), and Health Care (9.97%)—offers exposure to industries that are both tariff-resistant and policy-insulated. For example:
- Financials: Benefit from rising interest rates and strong credit quality.
- Industrials: Domestically oriented firms with pricing power to offset tariffs.
- Health Care: Insulated by long-term demand for medical services and innovation.

Policy Catalysts in Q2 2025: A Turning Point for Mid-Cap Value

The second quarter of 2025 is a pivotal period for policy clarity. Key developments include:
- Trade Agreements: Ongoing negotiations to resolve lingering disputes with key trading partners could reduce tariff risks for mid-cap industrials.
- Regulatory Support: The Biden administration's push for AI adoption and infrastructure spending could boost sectors like Health Care (e.g., telemedicine) and Technology (AI-driven productivity tools).

Thrivent's fund has already positioned itself to capitalize on these trends. Its top holdings include U.S. Bancorp (2.45%) and D.R. Horton (2.39%), firms with strong domestic footprints and pricing discipline.

Risk-Adjusted Returns: Outperformance in the Long Run

Despite short-term volatility (e.g., a -5.42% 3-month return ending May 2025), the fund's 5-year annualized return of 13.98% outperformed the Russell MidCap Value Index (13.18%) and the S&P MidCap 400 Value Index (14.91%). This underscores the fund's ability to deliver consistent, risk-aware returns over cycles.

The fund's beta of 1.03 and 3-year standard deviation of 19.21% reflect its higher volatility than the S&P 500, but this aligns with its mandate to pursue growth in a high-risk-reward segment. For aggressive investors with a long-term horizon, this volatility is a trade-off for potential upside.

Investment Thesis: Overweight Mid-Cap Value Now

The combination of structural ETF benefits, sector resilience, and imminent policy clarity makes mid-cap value a compelling overweight for 2025. Key steps for investors:

1. Rebalance Portfolios: Shift allocations from overvalued growth stocks to mid-cap value ETFs like Thrivent's upcoming offering.
2. Monitor Policy Developments: Track trade agreements and regulatory updates in Q2 to time entries or exits.
3. Leverage the ETF Transition: Use the Thrivent ETF (once launched) to gain diversified exposure to a disciplined, research-driven strategy.

Final Considerations

While the ETF ticker remains unknown, the fund's prospectus supplement (dated June 2, 2025) provides critical details on fees, risks, and operational changes. Investors should review this document before committing capital. Additionally, the 0.90% net expense ratio is reasonable for active management, but cost-sensitive investors may wish to compare against passive ETFs like the iShares Russell Midcap Value ETF (IWP).

In a market where policy uncertainty persists, the Thrivent Mid Cap Value ETF transition offers a rare opportunity to blend tactical liquidity with strategic value exposure. For those willing to look past short-term noise, this could be the catalyst to secure above-average returns in 2025 and beyond.

Disclaimer: Past performance does not guarantee future results. Investors should conduct their own due diligence and consult a financial advisor.