Is now the moment for small-caps? Small-cap value, specifically, could appeal. These firms are facing some tough borrowing costs given how high interest rates have become. Potential rate cut relief may only drop rates somewhat this year, too. As such, an active small-cap value ETF could stand out, with AVUV an appealing option.
See more: Bull vs Bear: Is It Time for Value ETFs to Rotate Into Favor?
The Avantis U.S. Small Cap Value ETF (AVUS) will hit its five-year mark as an ETF this fall. The strategy invests in highly profitable small-cap value firms. The strategy uses fundamental screens for factors like outstanding shares, cash flow, revenue, and more.
Interestingly, the strategy looks to offer the benefits of indexing like diversification and limited turnover with the ability to add value via its active decisions. The strategy has taken that approach for a fee of 25 basis points.
Small-Cap Value ETF AVUV’s Appeal
Perhaps speaking to the ETF’s appeal, the small-cap value fund recently surpassed $10 billion in AUM for the first time. It currently holds about $10.1 billion in ETF AUM, per VettaFi. That may owe at least in part to its notable track record. AVUV has returned 9.6% over the last three years. That total has helped it outperform both its FactSet Segment and ETF Database Category averages.
What role, then, might the small-cap value ETF play for the rest of 2024? As mentioned above, it’s a tough landscape for a lot of smaller firms. However, a value approach that unearths the firms that are proving their durability in that landscape could appeal. AVUV’s relatively cheap fee, too, may make it stand out among other active strategies.
The strategy may appeal as a satellite allocation in an overall portfolio. For investors looking to add some active exposure, the small-cap value ETF may be one to watch.
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