This year, approximately 240 new exchange traded products, including ETFs and exchanged traded notes (ETNs), have come to market in the U.S. Although it’s just three months old, the Avantis U.S. Equity ETF (AVUS) looks like one of the winners among this year’s crop of rookie ETFs.
Courtesy of Avantis Investors, by American Century Investments. AVUS debuted alongside several other ETFs in late September, including the Avantis International Small Cap Value ETF (AVDV) and the Avantis U.S. Small Cap Value ETF (AVUV).
As a unique feature designed to benefit various types of investors, gross expense ratios for these ETFs are expected to have the same objectives: 0.36% international small-cap value, 0.23% international equity, 0.33% emerging markets equity, 0.15% US equity, and 0.25% US small-cap value. With that annual fee of 0.15%, or $15 on a $10,000 stake, AVUS is one of the more cost-effective smart beta strategies on the market.
AVUS “pursues the benefits associated with indexing (diversification, low turnover, transparency of exposures), but with the ability to add value by making investment decisions using information in current prices,” according to Avantis Investors. The fund features “efficient portfolio management and trading process that is designed to enhance returns while seeking to reduce unnecessary risks and costs for investors.”
A Common Approach
The new Avantis ETFs share a common approach built upon an academically-supported, market-tested framework aiming to identify securities with expected high returns based on market prices and other company information. Relying on trading and portfolio management processes, the Avantis team analyzes whether the perceived benefits of a trade overcome its associated costs and risk.
Although it’s new, AVUS has more than $168 million in assets under management and is already gaining notoriety among analysts.
The fund holds more than 2,000 stocks, but none exceed a weight of 3.44%. Technology stocks account for almost 20% of AVUS’ weight while the financial services and consumer discretionary sectors combine for 30.50%.
“A fee advantage over incumbents is one feather in AVUS’ cap, but more important still are matters of process,” according to Morningstar. “The firm’s approach to defining value looks to address many of the criticisms of using as-reported book value to assess stocks’ cheapness. The end result is a low-cost core U.S. stock portfolio that makes modest bets on known sources of excess return.”
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The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.