Avantis Investors, an investment offering from global asset manager American Century Investments, recently reached the three-year anniversary of bringing its first five equity ETFs to the market. Each of the five initial ETFs has surpassed $1 billion in assets under management, and Avantis collectively now manages more than $14 billion across 18 ETFs.
To discuss this anniversary and how the issuer got here, VettaFi’s Head of Research Todd Rosenbluth recently sat down with Avantis Investors Chief Investment Officer Eduardo Repetto.
Despite how difficult markets have been over the course of the past three years, Repetto noted “it’s impressive how much advisors have embraced what we have to offer,” and pointed out a number of reasons why Avantis has seen success with financial advisors, from its product suite to marketing support to providing “frequent webinars on relevant topics… that can add value to the advisor.”
When discussing some common characteristics of Avantis ETFs, Repetto said that while index funds “deliver some advantages to investors, like tax efficiency, low fees,” and transparency, “indexes also come with a lot of drawbacks.”
“For example, indexes don’t use current market information [or] current prices when they decide to buy or to hold a security,” he said.
By contrast, Avantis’ actively managed ETFs “are trying to keep all the benefits of indexing,” but “also trying to add value by considering the price of every security” when deciding to buy or sell the security.”
“So, every day we’re looking at prices and fundamentals in order to decide, ‘Should we keep the security, or should we change for another security that is more attractive from the expected return point of view?’” Repetto explained. “So, we really provide all the benefits of indexing with improvements that are based on just better science, better implementation, and using current information.”
For example, Repetto discussed one of Avantis’ more popular ETFs, the Avantis U.S. Small Cap Value ETF (AVUV), which seeks to identify which securities the market is pricing at big discounts using financial science, current information, and data. This is different from the typical value strategy, which “just cares about buying low-priced securities.”
“When the market is pricing something at a big discount, that investment has a higher expected return,” he said.
According to Repetto, securities can have low prices for many reasons: a lot of liabilities, high operating losses, or low profits. So, buying those securities that have low prices “is like buying cheap sushi.”
“Do you want cheap sushi, or do you want sushi from a good restaurant that is priced at a discount?” he asked.
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