Avantis is a new asset management firm created by former Dimensional Fund Advisors employees. Here we'll review 9 Avantis ETFs for targeted, low-cost factor exposure.
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Avantis ETFs Video
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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 (DFA), considered the gold standard for factor tilt funds. As such, Avantis shares Dimensional DNA, which is a good thing.
Like DFA, Avantis provide relatively affordable 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 in finance combined with expert implementation to overweight drivers of returns that we would expect to both beat the market and conveniently mitigate portfolio risk over the long term. As a result, investors get the benefits of low-cost, diversified index investing and purposefully targeted factor investing in one vehicle.
Avantis is arguably the first firm to bring these sorts of sophisticated methodologies to retail investors with an affordable price tag. Chief Investment Officer Eduardo Repetto, who spent nearly two decades at DFA and was their co-CEO, said:
Our experience has shown us that investors are looking for reliable, diversified strategies that can add value over indexes and are cost-effective. That's what we plan to build.
Avantis is also backed by the well-known asset manager American Century Investments.
Now we'll review the most popular 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. I delved into AVUS in more detail in a separate post here.
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.
Morningstar even named this fund their “favorite new launch of the year” in 2019.
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 AVUS 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 5 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 8 basis points. This may change as time goes on. That said, these first 3 are arguably good for the novice investor who wants to dip their toes into factor investing.
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. I also covered AVUV specifically in its own separate post here.
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.
This has not gone unnoticed, as AVUV is Avantis's most popular fund.
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%.
AVES – Avantis Emerging Markets Value ETF
AVES is a newer Emerging Markets ETF from Avantis for more aggressive factor targeting than the previous AVEM. It has outperformed AVEM in its short lifespan since its launch in late 2021, but costs slightly more at 0.36%.
While I questioned whether AVEM is worthwhile over a cheaper, plain, indiscriminate index fund for Emerging Markets like VWO, AVES deviates much more and may indeed compensate investors for its greater fee via its vastly superior loadings.
AVGE – Avantis All Equity Markets ETF
AVGE is another newer fund from Avantis that launched in late 2022. This is a fund of funds – the first from Avantis – to essentially capture the entire global stock market with the addition of light factor tilts. That said, the fund does have home country bias for the U.S. with international exposure of only about 30%.
Also note that we'd consider this fund to be more truly actively managed than others on this list in terms of managers' freedom to allocate among different assets within the fund.
Because it is a fund of funds, American AVGE investors should get the benefit of pass-through foreign tax credits on some of its holdings, whereas a plain indexed global equities fund like VT from Vanguard is not eligible for one.
I covered AVGE in more detail in a dedicated post here.
AVGE has an expense ratio of 0.23%.
AVRE – Avantis Real Estate ETF
It's worth noting that broad Avantis funds like AVUS exclude REITs, so investors, particularly those focused on income, may want a dedicated REITs fund in their portfolio. AVRE is Avantis's offering for global REITs exposure.
The fund has an expense ratio of 0.17%.
AVIG – Avantis Core Fixed Income ETF
Avantis also have a few offerings for fixed income assets, one of which is AVIG, which gets you covered globally with a variety of investment-grade debt obligations from multiple types of issuers.
AVIG has an effective intermediate duration of about 7 years and a fee of 0.15%.
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.
Disclosures: I am long AVUV and AVDV in my own portfolio.
Disclaimer: While I love diving into investing-related data and playing around with backtests, this is not financial advice, investing advice, or tax advice. The information on this website is for informational, educational, and entertainment 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. I always attempt to ensure the accuracy of information presented but that accuracy cannot be guaranteed. Do your own due diligence. I mention M1 Finance a lot around here. M1 does not provide investment advice, and this is not an offer or solicitation of an offer, or advice to buy or sell any security, and you are encouraged to consult your personal investment, legal, and tax advisors. All examples above are hypothetical, do not reflect any specific investments, are for informational purposes only, and should not be considered an offer to buy or sell any products. All investing involves risk, including the risk of losing the money you invest. Past performance does not guarantee future results. Opinions are my own and do not represent those of other parties mentioned. Read my lengthier disclaimer here.
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