Avantis is a new asset management firm created by former Dimensional Fund Advisors employees. Here we’ll review 5 Avantis ETFs for targeted, low-cost factor exposure.
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Introduction – Avantis ETFs
Avantis Investors are the new kid on the block, but don’t think that means they lack experience or that they are in any way a suboptimal fund provider. Avantis was started by a few people who left Dimensional Fund Advisors, considered the gold standard for factor tilt funds.
Like Dimensional, Avantis provides relatively cheap but extremely reliable and appreciable factor exposure, specifically for Size, Value, and Profitability. So far, Dimensional’s new ETFs only provide all-cap, broad market exposure, specifically for the U.S., ex-US Developed Markets, and Emerging Markets. Avantis has those plus a couple more specifically for small cap value.
Just like Dimensional, Avantis draws on the most robust academic research to overweight drivers of returns that we would expect to both beat the market and conveniently mitigate portfolio risk over the long term.
Let’s review these Avantis ETFs.
AVUS – Avantis U.S. Equity ETF
As the name suggests, the Avantis U.S. Equity ETF (AVUS) aims to provide broad U.S. market exposure, with an active, light factor tilt toward stocks with strong profitability metrics (Profitability) and a lower relative price (Value). It also has a very small positive loading on Size, so its average market cap is lower than that of the market. Think basically a U.S. stock market index fund that we would expect to beat the market (and have lower volatility and risk) over the long term based on the best academic research.
In its extremely short lifespan thus far since January 2020, AVUS has outperformed the S&P 500 index. Hopefully the Value premium is making a resurgence.
AVUS has nearly $1 billion in assets, over 2,000 holdings, and an expense ratio of 0.15%.
AVDE – Avantis International Equity ETF
AVDE takes the same approach described for DFAU above, but this time for Developed Markets outside the United States. AVDE has an expense ratio of 0.23%. So far the factor loading on this one doesn’t look terribly different from plain ol’ VEA from Vanguard and may not be worth its higher fee (VEA is only 10 basis points). Bogleheads may want to stick with Vanguard funds for simplicity anyway. I plan to keep an eye on these.
AVEM – Avantis Emerging Markets Equity ETF
AVEM applies Avantis’s approach to Emerging Markets. I’m a fan of overweighting Emerging Markets relative to Developed Markets in a US-heavy portfolio, as Developed Markets are highly correlated to the U.S. and thus don’t offer as much of a diversification benefit as Emerging Markets.
Here too, though, this fund’s factor exposure doesn’t look materially different from that of Vanguard’s VWO, which costs 10 basis points. This may change as time goes on. I might even prefer WisdomTree’s XSOE here, which seems to capture smaller, more profitable companies with more conservative investment policies (i.e. comparatively more exposure to Size, Profitability, and Investment).
AVEM has the highest expense ratio of the three at 0.33%.
AVUV – Avantis U.S. Small Cap Value ETF
Previously, the S&P SmallCap 600 Value Index (via IJS, VIOV, or SLYV) was the go-to index to capture U.S. small-cap value. AVUV is a very new product, but in its short lifetime, it has achieved slightly better exposure to the Value premium, and comparatively much more exposure to the Profitability factor. I delved into the details of these U.S. small value ETFs here, out of which AVUV seems like the clear winner. AVUV recently replaced VIOV in my own portfolio.
In a nutshell, AVUV has been doing a great job so far of capturing small, undervalued stocks with strong financials. I think this one is where Avantis shines.
AVUV’s expense ratio is 0.25%, which is worth the superior factor loading in my opinion.
AVDV – Avantis International Small Cap Value ETF
AVDV is the international version of AVUV above, targeting small cap value stocks in ex-US Developed Markets. The fund has over $500 million in assets and a fee of 0.36%.
Where To Buy These Avantis ETFs
Thankfully, all the above Avantis ETFs should now be available at any major broker. My choice is M1 Finance. The broker has zero trade commissions and zero account fees, and offers fractional shares, dynamic rebalancing, intuitive pie visualization, and a sleek, user-friendly interface and mobile app. I wrote a comprehensive review of M1 Finance here.
Disclaimer: While I love diving into investing-related data and playing around with backtests, I am in no way a certified expert. I have no formal financial education. I am not a financial advisor, portfolio manager, or accountant. This is not financial advice, investing advice, or tax advice. The information on this website is for informational and recreational purposes only. Investment products discussed (ETFs, mutual funds, etc.) are for illustrative purposes only. It is not a recommendation to buy, sell, or otherwise transact in any of the products mentioned. Do your own due diligence. Past performance does not guarantee future returns. Read my lengthier disclaimer here.