Avantis Investors, a subsidiary of American Century Investments, has added an emerging markets ETF to its suite of multi-factor equity funds with socially responsible investment mandates.
Avantis Investors has added an emerging markets ETF to its suite of multi-factor ESG funds.
The Avantis Responsible Emerging Markets Equity ETF (AVSE US) has been listed on NYSE Arca with an expense ratio of 0.33%.
The fund complements the Avantis Responsible US Equity ETF (AVSU US) and Avantis Responsible International Equity ETF (AVSD US) which launched last week and target US and global developed ex-US equity markets, respectively.
The trio of ETFs represents Avantis’s first ESG-tailored products.
All three ETFs are actively managed by Chief Investment Officer Eduardo Repetto and Senior Portfolio Managers Ted Randall, Mitchell Firestein, and Daniel Ong.
The funds seek to outperform their broad market performance benchmarks – the MSCI USA IMI Index, MSCI World Ex-USA IMI Index, and MSCI Emerging Markets IMI Index – by excluding firms based on values, climate, and norms-based screening and then selecting and weighting constituents to harvest multiple factor risk premia.
Avantis harnesses insights from Sustainalytics and MSCI ESG Research to remove the 5% of companies from each universe with the worst carbon emission profiles as well as firms embroiled in severe ESG-related controversies, companies with low corporate governance scores, and businesses with operations linked to oil & gas, controversial or conventional weapons, factory farming, palm oil, tobacco, cannabis, gambling, and adult entertainment.
From these reduced universes, Avantis selects and weights securities based on a systematic investment approach that favours firms with smaller market capitalizations, higher profitability ratios, and lower valuations. The process also seeks to maintain broad diversification across companies and industrial sectors in order to mitigate concentration risk.
According to Avantis, the approach combines the benefits associated with indexing, including diversification, low turnover, transparency, and tax efficiency, with the potential to add value by incrementally harvesting factor returns through exploiting information contained in current prices.
Implementation costs are tightly controlled with the portfolio management team carefully analyzing whether the forecast benefits of a trade overcome its associated trade costs and risk.
All three ETFs make regular distributions to investors.