Avantis Investors made quite a splash in September 2019 with the debut of the Avantis U.S. Small Cap Value ETF (AVUV). With an expense ratio of 0.25% and the factor investing expertise of ex-Dimensional Fund Advisors (DFA) staff behind it, AVUV quickly became a staple for small-cap value retail investors.
To complement AVUV, Avantis also launched an international developed markets counterpart, the Avantis International Small Cap Value ETF (AVDV) and an emerging markets value ETF, the Avantis Emerging Markets Equity ETF (AVEM), allowing investors to slice and dice a complete portfolio.
Since its launch, AVUV has swelled to over $5.3 billion in assets under management (AUM), a breakneck pace for a factor ETF. Avantis later capitalized on its success with the launch of the globally diversified Avantis All Equity Markets ETF (AVGE) three years later in September 2022.
I covered AVGE earlier, but to sum it up briefly: This innovative ETF wraps 10 other Avantis ETFs, providing large-cap value, small-cap, and small-cap value tilts across U.S., developed, and emerging markets for a mere 0.23% net expense ratio.
The firm hasn't slowed down. On March 21, 2023, Avantis Investors filed a prospectus for six more factor ETFs to add to their lineup. Let's take an in-depth look into some of the more notable upcoming ETFs.
The pending lineup
The prospectus Avantis filed with the SEC lists a total of six factor ETFs, some of which have large-cap value and small-cap value tilts. They are:
- Avantis Total International Markets Equity ETF (AVTD): 0.31% expense ratio.
- Avantis Total International Markets Value ETF (AVTV): 0.34% expense ratio.
- Avantis U.S. Large Cap Equity ETF (AVLC): 0.15% expense ratio.
- Avantis All Equity Markets Value ETF (AVGV): 0.26% expense ratio.
- Avantis International Small Cap Equity ETF (AVDS): 0.30% expense ratio.
- Avantis Moderate Allocation ETF (AVMG): 0.21% expense ratio.
Some of these ETFs are designed to be complements to existing Avantis ETFs for investors and advisors constructing their own factor-tilted portfolios. For example, AVTD pairs well with the existing Avantis U.S. Equity ETF (AVUS), while AVTV goes hand-in-hand with the Avantis U.S. Large Cap Value ETF (AVLV).
AVMG is highly interesting. This ETF is essentially a AVGE with a 30-40% allocation to fixed income via the Avantis Short-Term Fixed Income ETF (AVSF) and the Avantis Core Fixed Income ETF (AVIG). With AVGM, investors are getting a 70/30 – 60/40 globally diversified ETF with a value and size factor tilt.
The other ETF worth examining further is AVGV, which I expect value factor investors to clamor over. While the existing AVGE has a decent size and value tilt, it may fall short for die-hard factor investors. AVGV solves that issue by allocating only to Avantis large and small-cap value ETFs from U.S., developed, and emerging markets.
My thoughts on the new ETFs
Avantis has clearly listened to investor demand. Their new lineup of ETFs not only makes factor investing more accessible, but also simpler. The launch of all-in-one factor ETFs with global diversification and a low expense ratio like AVGE, AVGV, and AVGM may go far as to convert passive, buy-and-hold index investors looking for an affordable way to beat the market.
The expense ratios are also very reasonable. Part of the problem with some factor ETFs is that high fees can negate the benefits of a long-term factor tilt. Like returns, fees compound. By keeping them low, Avantis can ensure better long-term net returns for its ETFs.
Make no mistake, these ETFs are actively managed. By buying them, investors are making a bet that Avantis' "secret sauce" to factor investing is not only effective but will persist in the future. That being said, I'm pretty confident in Avantis' ability to deliver factor investing properly given their ex-DFA affiliation and the reputation/track record of the latter.
This content was originally published by our partners at ETF Central.