Were any equity category to offer investors a new path in 2025, small-caps may be where to look. Following a year in which megacap tech firms contributed massively to most major market indexes, some investors may be concerned by the potential concentration risk those firms pose. What’s more, those firms are sitting at historically high valuations. Small-caps, by contrast, may present better value for money, with significant upside. That may explain in part how the small-cap ETF AVUV has taken in more than half a billion in one-month flows.
See more: Bull vs. Bear: Small-Caps, Foreign or Domestic?
The Avantis U.S. Small Cap Value ETF (AVUV ) has pulled in $571 million in net inflows over the last month, per ETF Database data. The small-cap ETF charges 25 basis points to actively invest in U.S. small-cap value stocks. The strategy screens for fundamental factors like outstanding shares, cash flows, revenue, and more.
That focus on value among small-caps can help find those smaller firms underrated by the market. What’s more, those companies could provide a degree of diversification away from megacap tech. Its active style can help the fund adapt to risk and more closely scrutinize potential investments. Together, those factors may speak to AVUV’s value-driven small-cap ETF approach.
In doing so, the strategy has returned 14.69% over the last one-year period, according to Avantis Investors data. AVUV has returned 10.3% over the last three years, as well. That three-year return helped the strategy beat its benchmark, the Russell 2000 Value Index, over that time period.
Together, the strategy’s approach, flows, and performance may signal its potential place as a satellite ETF to watch. Should tech firms struggle to meet their huge valuations, small-cap AVUV could provide both upside and diversification away from that concentration risk.
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