Avantis Investors, a $7 billion investment offering backed by American Century Investments, announced the expansion of its exchange traded fund lineup with the introduction of four new ETFs in the last week that focus on value and real estate, according to the press release.
The funds all utilize a proprietary systematic approach that is a combination of financial science and what Avantis Investors views as common sense investing principles. The ETFs will all be co-managed by Avantis Investors CIO Eduardo Repetto, Ph.D., along with Daniel Ong, senior portfolio manager and CFA.
“We are focused on putting strategies into the market where clients have asked for our help,” said Repetto in the press release. “These are important asset classes for our clients, and we’re thrilled to provide them with competitively priced, tax-efficient solutions to incorporate in their portfolios.”
Value ETFs
The Avantis Emerging Markets Value ETF (AVES) invests in companies in emerging markets of all market caps and sectors and seeks securities that have lower valuation with higher profitability ratios.
- AVES typically invests in securities within the MSCI Emerging Markets IMI Value Index and weights heavier for high profitability and value companies, and it underweights or excludes securities with lower returns. The portfolio managers consider a country’s market size and liquidity before choosing to invest.
- Value companies are defined as those that have lower prices relative to book value ratio or other fundamental value, and the definition takes into account financials and market data such as shares outstanding, book value, and the components associated with the book value. High profitability companies are defined as those with higher cash-based operating profitability.
- AVES carries an expense ratio of 0.36% and is actively managed.
The Avantis International Large Cap Value ETF (AVIV) invests in non-U.S. large-cap companies and seeks companies that Avantis believes to be trading at lower valuations but that still maintain high profitability ratios.
- AVIV typically invests in securities within the MSCI World-Ex USA Value Index and weights heavier for high profitability and value companies, and it underweights or excludes securities with lower returns. Avantis defines large-cap companies as those with market caps at least as big as the smallest company contained within the underlying index, and whose smallest company as of the end of July was $895.1 million.
- The fund will invest at least 40% of its assets in securities outside of the U.S under favorable market conditions, and unfavorable market environments would reduce that number to 30%. It also will ensure allocation into at least three different countries outside the U.S. at all times.
- AVIV carries an expense ratio of 0.25% and is actively managed.
The Avantis U.S. Large Cap Value ETF (AVLV) invests in a range of U.S. large-cap companies and seeks companies that are trading at low valuations with higher profitability ratios.
- AVLV invests in securities within the Russell 1000 Value Index and weights heavier for high profitability and value companies, and it underweights or excludes securities with lower returns. Avantis defines large-cap companies as those with market caps that are as large as the smallest company contained in the underlying index; the smallest company within the underlying index as of the end of July was $786.7 million.
- The portfolio managers look at where the company is headquartered, the location of principal operations, the source of the majority of revenue, the location of the principal trading market, the country the company was legally organized in, and whether it is within the underlying index to determine if a security is considered a U.S. company or not.
- AVLV carries an expense ratio of 0.15% and is actively managed.
Real Estate ETF
The Avantis Real Estate ETF (AVRE) gives exposure to real estate securities that are focused on income derived from investments within real estate and are structured similarly to real estate investment trusts (REITs).
- AVRE typically invests in securities within the S&P Global REIT Index and seeks to invest in companies that have higher returns or better risk characteristics. A REIT invests primarily in income-producing real estate or else makes loans to individuals involved in the real estate industry.
- REITs and REIT-like entities typically distribute a large portion of their earnings to qualify as tax passthrough entities, thus keeping high levels of leverage available to finance their growth or operations. AVRE can underweight or exclude securities with high leverage in order to achieve a better risk/return profile at times when borrowing, refinancing, or raising capital may be more expensive for those securities.
- The portfolio managers consider a company engaged in the real estate industry if at least 50% of its revenue or 50% of its market value at the time of purchase is attributed to the ownership, construction, management, or sale of real estate.
- AVRE carries an expense ratio of 0.17% and is actively managed.
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