Avantis targets international small-caps with new factor-enhanced ETF

Jul 24th, 2023 | By | Category: Equities

Smart beta specialist Avantis Investors has launched a new ETF that aims to capture alpha by incrementally harvesting factor returns within small-cap equities listed in developed markets outside of the US.

Mitchell Firestein, Senior Portfolio Manager at Avantis Investors

Mitchell Firestein, Senior Portfolio Manager at Avantis Investors.

The Avantis International Small Cap Equity ETF (AVDS US) has been listed on NYSE Arca with an expense ratio of 0.30%.

The fund, which is actively managed by Chief Investment Officer Eduardo Repetto and Senior Portfolio Managers Ted Randall, Mitchell Firestein, and Daniel Ong, seeks to outperform the MSCI World ex-US Small-Cap Index by investing in a broad group of non-US small-cap companies believed to have higher expected returns.

The selection and weighting of securities in the portfolio are based on a systematic investment approach that favours firms with higher profitability ratios and low valuations while maintaining broad diversification across countries, industrial sectors, and companies in order to mitigate concentration risk.

Implementation costs are tightly controlled with the fund’s management carefully analyzing whether the forecast benefits of a trade overcome its associated trade costs and risk.

According to Avantis, the strategy combines the benefits associated with indexing, including diversification, low turnover, transparency, and tax efficiency, with the potential to add value by making investment decisions using information contained in current prices.

The ETF compliments the Avantis US Small Cap Equity ETF (AVSC US) which applies the same factor-enhancing principles to US-listed small-cap stocks. AVSC, which debuted in January 2022, currently houses $440 million in assets and has an expense ratio of 0.25%. The fund has slightly outperformed the benchmark Russell 2000 Index over the past year (as of the end of June) with a return of 12.53% compared to 12.31%.

Mitchell Firestein, Senior Portfolio Manager at Avantis Investors, said: “We are excited to add another small-cap ETF to our line-up. We believe AVDS provides an efficient way to get exposure to small-cap companies in international markets at an attractive expense ratio.”

Last month, Avantis also launched four new actively managed ETFs-of-ETFs delivering multi-factor strategies diversified across regions and asset classes.

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