All eyes in the market right now are on the banking sector, as fear of contagion risk from trouble at Silicon Valley Bank (SVB) and tumbling First Republic Bank (FRC) abounds. That includes ETF investors, with the banking sector situation leading off Bloomberg TV’s ETF IQ show Monday including Avantis Investors’ CIO Eduardo Repetto. Repetto spoke to hosts Eric Balchunas and Katie Greifeld about his view on the banking picture and Avantis’ ETF suite.
Avantis Investors, a brand from American Century Investments, manages the Avantis U.S. Small Cap Value ETF (AVUV) as its largest by AUM with $5.5 billion. According to its sector weightings as of February 28th, AVUV’s largest sector weight was financials at 29%, followed by consumer discretionary at 18%.
Despite that weighting, AVUV has added $81.8 million in net inflows over the last five days. Responding to a question from Greifeld as to whether Avantis would be changing AVUV’s allocation or riding out the banking turmoil, Repetto explained the firm would aim to ride out the turbulence.
“At this time, we have to ride this out,” Repetto said, underlining AVUV’s volume advantage. “You have an allocation to banks that’s similar to what you see in the benchmark…with the Fed acting, the FDIC acting, people should feel ok with deposits, they will have access to their money.”
Still, volatility will be high, Repetto said, with fear and anxiety perhaps impacting prices. Agreeing with Greifeld, Repetto said that they too had expected markets Monday to be calmer given futures and news surrounding the government’s response to the bank situation, but that it was also possible that a lot of people may have put sell orders in overnight in response to the turmoil.
AVUV actively invests in U.S. small-cap value stocks that are highly profitable according to fundamental screens like shares outstanding, cash flow, revenue, and more. AVUV charges 25 basis points and just hit its three-year mark in the Fall, having launched in September 2019. As small cap strategies have their moment, investors may want to keep an eye on how AVUV leverages its size and volume, as the Avantis suite continues to ride strong momentum.
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