Rate cuts, after so much back and forth, appear imminent following Fed Chair Jay Powell’s most recent comments at Jackson Hole. That many see many ETF investors on the hunt for the right strategy to benefit from the unwinding of the last two years’ rate regime. A small-cap ETF, in particular, could offer a particular appeal. The Avantis U.S. Small Cap Value ETF (AVUV) stands out thanks to its particular approach and the major milestone it’s on track to reach.
See more: Watch These 3 ETFs for Rate Cuts This Fall
AVUV invests in small-cap value names with a fundamental analysis screen. The small-cap ETF takes an active approach, looking for value stocks that are highly profitable. Its managers consider fundamental factors like shares outstanding, cash flow, revenue, and more in assessing stocks.
Amid that approach, the fund is on track to hit a major milestone. AVUV will hit its fifth anniversary this September, which, while less significant perhaps than an ETF’s three-year milestone, represents another step into the upper echelon of ETFs. Many investors look for strategies with a certain vintage and liquidity before jumping onboard. AVUV currently holds more than $13 billion in AUM.
The fund charges a 25 basis point fee for its active approach. So, why look to the fund for rate cuts? Small-cap value names could be positioned to stand out among rate cuts. Those firms, per the small-cap ETF’s strategy, are already producing profits, but underrated by the market. AVUV’s active managers could help pinpoint those mismatches and identify the funds best positioned to ride cheaper borrowing. A small-cap approach could offer a particular boost, too, given how many U.S. investors are likely overweight large-caps.
AVUV has returned 20.3% over the last one-year period, per Avantis Investors data. The small-cap ETF has beaten its benchmark’s 15.7% return in that time. For investors looking to play rate cuts, AVUV may draw the eye.
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