Cyclical value stocks are on the mend, but quality should be a priority when investors hunt for value. The actively managed Avantis U.S. Equity ETF (AVUS) is one way to go for quality value hunters.
AVUS “pursues the benefits associated with indexing (diversification, low turnover, transparency of exposures), but with the ability to add value by making investment decisions using the information in current prices,” according to Avantis Investors. The fund features an “efficient portfolio management and trading process that is designed to enhance returns while seeking to reduce unnecessary risks and costs for investors.”
AVUS is rooted in an academically-supported, market-tested framework aiming to identify securities with expected high returns based on market prices and other company information. Relying on trading and portfolio management processes, the Avantis team analyzes whether the perceived benefits of a trade overcome its associated costs and risk.
“Avantis is a firm that was stood up by former DFA co-CEO Eduardo Repetto. And Eduardo has subsequently brought over a number of his former colleagues from Dimensional Fund Advisors to basically build what I’ve referred to as ‘DFA 2.0.’ Avantis’ strategies have shared DNA with DFA,” notes Morningstar’s Ben Johnson. “They look to improve on DFA’s secret formula in certain ways.”
The Long-Term Potential of the AVUS ETF
AVUS, which debuted in 2019, is potentially attractive for investors looking for alternatives to cap-weighted funds and those looking for long-term core portfolio holdings.
The fund invests primarily in a diverse group of US companies of all market capitalizations, across sectors and industries, emphasizing investment in companies believed to have higher expected returns. Additionally, AVUS offers investors a prudent, lower-risk approach to domestic equity exposure.
“So, in this case, one of those factors—the all-important factor that’s been missing in action for some time—is value,” adds Johnson. “AVUS is a great option to look at for broad-based exposure to U.S. stocks, that has tilts toward relatively higher-quality, relatively cheaper names from that universe.”
For more on active strategies, visit our Active ETF Channel.