Investors can use plenty of data points to assess ETF momentum from tech charts to returns, but perhaps the most obvious may be the simple measure of flows. Indeed, flows can help tell what markets are thinking about, if read correctly. In this case, it may be small caps, with the small-cap value ETF AVUV hitting $3 billion in YTD flows per ETF Database.
See more: How Active Small-Cap Value ‘AVUV’ Enhances Portfolios
The Avantis U.S. Small Cap Value ETF (AVUV ), which crossed $10 billion in AUM just a few months ago, has now reached $13.1 billion behind major flows this year. In just the last month it has added $673 million in net inflows. Over three months, that net inflow total rises to $1.2 billion.
Behind Small-Cap Value ETF AVUV's Flows Pace
So, what’s behind that interest in the small-cap value ETF? AVUV takes an active approach to its small-cap value remit. The fund looks for long-term capital appreciation, seeking highly profitable value small caps. It screens for fundamental factors like cash flow, price-to-book value, and shares outstanding. The strategy charges 25 bps.
Per data from Avantis Investors, the small-cap value ETF has returned 17.6% over the last one-year period on an average annual basis. That outperformed its benchmark in that same period, with the benchmark returning just 10.9%.
The increased pace of inflows may owe to the growing belief that the Fed will cut rates this Fall. Rate cuts would likely benefit smaller firms more than larger ones due to the amount of debt smaller firms take on. What’s more, with larger firms in many ways overvalued and overconcentrated, the upside from cuts may be disproportionately found in smaller, underpriced names.
That’s where a small-cap value ETF like AVUV may appeal. For those investors looking at ETF options entering the second half, the strategy might be worth investigating.
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