Avantis US Equity ETF

AVUS

Market cap $9.72B

Avantis US Equity ETF is an actively managed fund focusing on value and profitability, with over 1,900 stocks and a 0.15% expense ratio. AVUS offers broad diversification and value characteristics but has slightly underperformed the Russell 3000 benchmark since inception, with marginally higher risk. AVUS has lagged several leading actively managed U.S. equity ETFs in total return and Sharpe ratio over the past 3.5 years.

The Avantis US Equity ETF offers a portfolio heavily weighted toward large cap stocks with some added exposure to small-cap stocks, making it worth consideration for diversification. AVUS appears to have an attractive valuation based on a number of difference financial metrics with the potential for significant gains if the market rebounds. Despite its advantages, the fund has underperformed in recent years and carries the risk of continued struggles relative to its index due to active management.

As active ETFs and active investing grow in significance, so too have the different ways active funds can be used. While many understand active funds in contrast to passive, index funds, the reality is more intricate.

AVUS ETF targets U.S. companies with attractive valuations and high profitability, maintaining a low turnover ratio and broad market cap allocation. Despite its low valuation and competitive expense ratio, AVUS's performance has been mixed, underperforming some peers over 3- and 5-year periods. The fund's sector allocation emphasizes financial services and energy, with limited exposure to high-growth technology stocks, affecting its earnings growth potential.

My friend and industry veteran Dave Nadig used to call the exercise of interpreting ETF asset flows as “reading the tea leaves.” I have always loved that image because it suggests asset flows can be telling, but they are also open to interpretation.

Avantis US Equity ETF is an actively managed fund focused on value and profitability. The AVUS ETF is better diversified across sectors and holdings than a broad benchmark. It also shows better valuation and growth metrics. However, it has not brought significant excess return since its inception, and it has lagged passive ETFs in value and quality since 2022.

As active ETFs continue to make strides in the ETF ecosystem, certain strategies have stood out. Active funds have contributed significantly to inflows for ETFs over the last few years as investors move out of mutual funds.

Active ETFs are on the rise. More than 30 years since the arrival of the first ETF in the U.S., active ETFs are now having their moment.

Phil McInnis, chief investment strategist at Avantis Investors by American Century Investments, joins ‘Halftime Report' on ‘ETF Edge' to discuss the firm's new form of active management, why investors are diversifying their portfolios with small caps and more.

AVUS is an actively managed total market fund with a low 0.15% expense ratio. Diversification is excellent, and it's an efficient way for investors to lessen exposure to Magnificent Seven stocks. AVUS trades at a three-point discount to VTI, a passively managed alternative. The offset is lower growth, but that strategy should work well if growth stocks fall out of favor. However, my analysis reveals AVUS's selections have lower profitability margins across the board, a finding that runs counter to the claims on its Fact Sheet.