Active management, quality and value: the AVUS Trifecta



VSEconomic value stocks are on the mend, but quality should be a priority when investors are looking for value. Active management Avantis U.S. Equity ETF (AVUS) is a way forward for quality value hunters.

AVUS “seeks the benefits associated with indexing (diversification, low turnover, transparency of exposures), but with the ability to add value by making investment decisions using current price information,” according to Avantis Investors . The fund offers an “efficient portfolio management and trading process designed to improve returns while seeking to reduce unnecessary risk and costs to investors”.

AVUS is anchored in an academic and market-tested framework aimed at identifying securities with expected high returns based on market prices and other company information. Drawing on the trading and portfolio management processes, the Avantis team analyzes whether the perceived benefits of a transaction outweigh the associated costs and risks.

“Avantis is a company founded by the former co-CEO of DFA, Eduardo Repetto. And Eduardo subsequently brought in a number of his former colleagues from Dimensional Fund Advisors to build what I called “DFA 2.0”. Avantis’ strategies have shared DNA with DFA, ”notes Morningstar’s Ben Johnson. “They are looking to improve the secret formula for DFA in certain ways.”

The long-term potential of the AVUS ETF

AVUS, which debuted in 2019, is potentially attractive to investors looking for alternatives to capitalization-weighted funds and for those looking for long-term core portfolios.

The fund invests primarily in a diverse group of US companies of all market capitalizations, across sectors and industries, with an emphasis on investments in companies that are expected to have higher expected returns. Additionally, AVUS offers investors a conservative, low-risk approach to domestic equity exposure.

“So in this case, one of those factors – the most important factor that has been missing from the stock for quite some time – is value,” Johnson adds. “AVUS is a great option to look for for broad exposure to US equities, which leans toward relatively higher quality and relatively cheaper stocks in that universe.”

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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