Avantis Investors launches debut fixed income ETFs

Oct 19th, 2020 | By | Category: Fixed Income

Avantis Investors, a subsidiary of American Century Investments, has introduced its first fixed income ETFs.

Avantis Investors launches first two fixed income ETFs

Eduardo Repetto, Chief Investment Officer, Avantis.

The actively managed Avantis Core Fixed Income ETF (AVIG US) and the Avantis Short-Term Fixed Income ETF (AVSF US) have listed on NYSE Arca and launch with combined assets of $45 million.

The funds are designed to fit into investors’ asset allocations as low-cost core portfolio solutions.

Each ETF provides diversified multi-sector bond exposure and comes with an expense ratio of just 0.15%.

Distributions are made to investors on a monthly basis.

Avantis’s fixed income debut follows the firm’s five inaugural equity ETFs which launched in September 2019. These funds are also low-cost active ETFs that seek enhanced returns through factor positioning in US, international, and emerging market stocks.

Eduardo Repetto, CIO of Avantis Investors, commented, “We’re excited to announce an expansion of our investment capabilities into fixed income. Since we launched our equity strategies about a year ago, in every client conversation it is clear that investors want well-designed, low-cost solutions.

“Fixed income is an important part of asset allocation, and we think our approach will resonate with investors.”

Investment process

The new fixed income ETFs aim to combine the benefits associated with indexing, such as diversification and transparency, with the ability to add value through an active overlay.

Each fund invests primarily in investment-grade debt obligations from government, corporate, and agency issuers globally.

The Avantis Core Fixed Income ETF provides broad maturity exposure and will maintain a weighted average duration within two years of the benchmark Bloomberg Barclays US Aggregate Bond Index, while the Avantis Short-Term Fixed Income ETF targets opportunities at the short end of the yield curve by maintaining a weighted average maturity below three years.

Each ETF categorizes eligible securities into component groups based on factors such as sector, credit rating, duration, country, and currency. The implied expected return of each component group is calculated using security prices and looking at the whole term structure of interest rates while considering valuation metrics such as yield, duration, and option-adjusted spreads.

Avantis then sets the portfolio weights for each component group in a bid to maximize return and manage risk more effectively compared to the funds’ benchmark indices. Currency hedging may be used on a discretionary basis.

Avantis has announced its intention to further expand its fixed income offering later this year with the launch of a municipal bond ETF.

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