Avantis targets US small-caps in new factor-enhanced ETF

Jan 13th, 2022 | By | Category: Equities

Avantis Investors, a subsidiary of American Century Investments, has launched a US small-cap equity ETF that aims to capture alpha by incrementally harvesting factor returns.

Avantis Investors ETFs

Avantis has launched a new factor-enhanced ETF targeting US small-cap equities.

The Avantis US Small Cap Equity ETF (AVSC US) has been listed on NYSE Arca with an expense ratio of 0.25%.

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 Russell 2000 Index by investing in a broad group of 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 companies and industrial sectors in order to mitigate concentration risk.

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

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.

Avantis now offers 13 ETFs, each employing factor-based investment approaches within different equity, fixed income, and real estate markets. Within this suite, the firm also offers the Avantis US Small Cap Value ETF (AVUV US) which utilizes a similar methodology as described above but applied to a starting universe of US small-cap value stocks, thereby delivering more focused exposure to the value factor. AVUV also comes with an expense ratio of 0.25% and currently houses over $2.5 billion in assets.

Eduardo Repetto, CIO of Avantis Investors, said: “As one of the fastest-growing ETF issuers in the industry, we’re excited to announce an expansion of the investment offering from Avantis Investors. Small-caps can play an important role in investors’ allocations, and we are pleased to provide investors with an option that complements what we already offer in the small-cap space. We remain committed to delivering the strategies our clients ask for.”

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