Why Are Investors Looking to International Small Caps?

The Avantis International Small Cap Value ETF (AVDV ) has seen strong inflows as investors look to add active exposure to non-U.S. developed small-cap companies. The fund focuses on companies believed to be trading at low valuations with higher profitability ratios, which is designed to increase expected returns.

See more: How Active Small-Cap Value ‘AVUV’ Enhances Portfolios

The fund’s active ETF structure enables it to pursue the benefits associated with indexing (diversification, low turnover, transparency of exposures). However, the fund also has the ability to add value by making investment decisions using information in current prices, according to the fund’s website.

Active ETFs have garnered significant in recent years. Net flows into actively managed ETFs surged to $66 billion in the first quarter of 2024, beating the previous record. Notably, that $66 billion figure accounted for around one third of all first flows during the quarter, despite active ETFs making up around 9% of the entire ETF landscape.

See more: Active ETFs: Bright Spots Beyond the Border

AVDV provides the greatest exposure to Europe (46.3%). However, the Asian Pacific region trailing closely behind (40.5% of the fund by weight.) Furthermore, 12.6% of the fund by weight is in companies in North, Central, and South America, according to ETF Database.

Looking more closely, Japan is the largest single-country exposure (making up 30% of the fund by weight). The other top-five countries by weight represented in the fund include the United Kingdom (14%), Canada (10%), Australia (9%), and Sweden (5%).

AVDV has $5.9 billion in assets under management. The fund has seen $115 million in net flows in the past one-week period and $217 million over four weeks. Year to date through June 26, the fund has accreted $688 million.

The fund charges 36 basis points, a competitive price for active management.

For more news, information, and analysis, visit the Core Strategies Channel.