Avantis International Small Cap Equity ETF (AVDS)

Overview

The Avantis International Small Cap Equity ETF (AVSG) seeks to provide long-term capital appreciation by investing primarily in foreign small-cap equity securities. It focuses on companies with strong fundamentals, aiming for a diversified portfolio. The strategy is rooted in quantitative research and seeks to identify companies that are undervalued relative to their intrinsic value.

Reputation and Reliability

Avantis ETFs are managed by Dimensional Fund Advisors (DFA), a highly respected investment firm with a long-standing reputation for its evidence-based, systematic investment approach and commitment to long-term investing principles. DFA is known for its institutional-quality investment management.

Management Expertise

The ETF is managed by a team of experienced professionals at Dimensional Fund Advisors, who leverage their deep expertise in quantitative research, portfolio construction, and risk management to implement the investment strategy.

Goal

To achieve long-term capital appreciation by investing in a diversified portfolio of small capitalization equity securities of companies located in developed and emerging markets, excluding the United States.

Investment Approach and Strategy

Strategy: The ETF is actively managed, meaning it does not track a specific index. Instead, it employs a quantitative-driven strategy based on academic research, focusing on factors like value, profitability, and investment to identify attractive small-cap companies.

Composition The ETF primarily holds stocks of small-cap companies. The portfolio is diversified across various industries and geographic regions outside of the United States, with a focus on companies exhibiting certain fundamental characteristics deemed to be predictive of higher future returns.

Market Share: Information on specific market share for individual ETFs is proprietary and not publicly disclosed in a standardized way. However, Avantis is a growing provider in the ETF space, particularly for actively managed, factor-based strategies.

Total Net Assets (AUM): As of recent data, the Total Net Assets (AUM) for the Avantis International Small Cap Equity ETF (AVSG) are approximately $2.7 billion.

Key Competitors

• iShares MSCI EAFE Small-Cap ETF (SCZ)
• Vanguard FTSE Developed Markets ETF (VEA)
• iShares Core MSCI EAFE ETF (IEFA)

Competitive Landscape

The international small-cap ETF market is competitive, with many passive index-tracking ETFs dominating in terms of AUM and trading volume. Avantis's competitive advantage lies in its active management approach, which aims to outperform passive benchmarks by systematically selecting undervalued companies based on rigorous quantitative research. Disadvantages may include higher expense ratios compared to some passive alternatives and the inherent risks of active management.

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Benchmark Comparison: The ETF aims to outperform a benchmark that represents international small-cap equity performance. While specific benchmark comparisons vary by reporting source, Avantis ETFs generally seek to deliver alpha through their active management strategy.

Expense Ratio: 0.29%

Average Trading Volume

The ETF exhibits moderate average daily trading volume, suggesting reasonable liquidity for most investors.

Bid-Ask Spread

The bid-ask spread is typically tight, indicating efficient trading and minimal transaction costs for investors.

Market Environment Factors

Factors influencing AVSG include global economic growth, currency fluctuations, geopolitical stability in international markets, interest rate policies of various central banks, and sector-specific performance trends in international small-cap companies. Increased global economic activity and a positive sentiment towards equities generally benefit this ETF.

Growth Trajectory

Avantis has seen steady growth since its inception, driven by investor demand for actively managed, factor-based strategies. The ETF has maintained its core investment philosophy, focusing on its quantitative methodology for security selection and portfolio construction, ensuring consistency in its approach.

Competitive Edge

Avantis's competitive edge stems from its deep roots in academic research and a disciplined, quantitative investment process. By focusing on factors like value and profitability, it aims to identify and exploit inefficiencies in the international small-cap market that passive strategies may overlook. This systematic approach allows for consistent application of its strategy, potentially leading to superior risk-adjusted returns over the long term.

Volatility

As a small-cap international equity ETF, AVSG is expected to exhibit higher historical volatility compared to broad-based large-cap or developed market ETFs due to the inherent risks associated with smaller companies and international markets.

Market Risk

Specific risks include currency risk (due to investing in non-USD denominated assets), political and economic instability in foreign countries, smaller company risk (less liquidity, higher susceptibility to economic downturns), and the risks associated with active management, where performance may deviate significantly from passive benchmarks.

Ideal Investor Profile

The ideal investor is one seeking long-term capital appreciation, comfortable with higher volatility, and has a diversified portfolio. Investors should understand and accept the risks associated with international small-cap equities and actively managed funds.

Market Risk

This ETF is generally best suited for long-term investors who believe in the potential for international small-cap equities to outperform over extended periods and who are looking for an actively managed solution to access this segment of the market.

The Avantis International Small Cap Equity ETF (AVSG) is an actively managed fund offering exposure to global small-cap equities outside the US, driven by a quantitative, factor-based strategy. Managed by Dimensional Fund Advisors, it aims for long-term capital appreciation by identifying undervalued companies. While facing competition, its unique approach and focus on fundamental research provide a competitive edge. Investors should be aware of its higher volatility and potential risks associated with international small-cap investments.

Data Sources:

• Avantis Investors Official Website
• Morningstar
• ETF.com
• Financial Data Providers

Disclaimers:

This information is for educational purposes only and should not be considered investment advice. Past performance is not indicative of future results. Investing involves risk, including the potential loss of principal. Consult with a qualified financial advisor before making any investment decisions.