U.S. investors have benefitted significantly over the last year from big tech names as A.I. has risen to prominence. As part of that rise, however, U.S. stocks have become pretty expensive. While a soft landing presents an appealing case to stay the course there, diversifying away from the U.S. could offer an appealing combination of upside and risk limitation. With one particular emerging markets equity ETF raking in the AUM, it could be time to look abroad.
See more: Emerging Markets ETF AVEM Sees Flows Accelerate Nearing 5th Birthday
These markets include many benefitting from a growing middle class, much-reduced inflation, and a diversified global supply chain. The Avantis Emerging Markets Equity ETF (AVEM) may be picking up on that groundswell given its significant flows and AUM growth. AVEM has added half a billion in net inflows over just the last month per ETF Database. Over the last six months, its AUM has growth by more than $1.3 billion.
The Case For an Emerging Markets Equity ETF
AVEM has reached more than $6 billion in AUM since launching just about five years ago. In fact, the fund will hit its fifth anniversary of operation in less than a week, with that milestone perhaps drawing additional attention.
The strategy actively invests in emerging markets stocks of all market caps. AVEM leans into small caps, looking for companies with strong profits and low valuations. The fund underweights large caps with lower profitability and higher price-to-book values.
For a 33 basis point (bps) fee, the emerging markets equity ETF has returned 17.3% over the last year per Avantis Investors data. That outperformed its benchmark’s 15.2% return in that time. On a YTD basis, the strategy has returned 10.2% compared to the benchmark’s 9.4%. Taken together, its low-cost, active exposure could position the ETF as a solid addition to the edges of an overall portfolio.
American Century Investments Head of Portfolio Solutions Rene Casis will speak during VettaFi’s Q4 Equity Symposium starting at 11 AM ET on September 19th next week.
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