Avantis Emerging Markets Value ETF’s Process Pillar rating is Average, but a strong management team still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy gets an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a considerable underweight position in quality exposure and has a substantial overweight in yield exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst Rating

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. Avantis Emerging Markets Value ETF earns an Average Process Pillar rating. 

The leading factor in the rating is the firm's five-year retention rate of 83% over the period. The depth of the portfolio management team also bolsters the process. With five portfolio managers, the fund is well-staffed. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 51%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup.

 This strategy leans toward smaller, more undervalued companies compared with its average peer in the Diversified Emerging Mkts Morningstar Category. Examining additional factor exposure, this strategy has consistently favored low-quality stocks compared with Morningstar Category peers over the past few years. Lacking this ballast, the fund's prospects could rest on its ability to beat peers during economic booms. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. The managers have also tended to overweight yield during recent years, shown by the portfolio's high exposure to dividends or buybacks. Higher-yield stocks can provide dependable income, but also have their risks. Dividend payers may cut payouts, for instance, if their earnings fall. Compared with category peers, the strategy also had more exposure to the Yield factor in the most recent month. Additionally, this strategy has demonstrated a preference for high-momentum stocks in these years. Momentum approaches bet that rising stocks will continue to rise and that lagging stocks will continue to lag. In this month, the strategy also had more exposure to the Momentum factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in industrials and basic materials relative to the category average by 6.7 and 6.5 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer defensive, underweight the average by 9.9 and 4.0 percentage points of assets, respectively. The portfolio is composed of 1,530 holdings and its assets are more dispersed than peers in the category. In particular, 9.0% of the portfolio's assets are concentrated in the top 10 fund holdings, as opposed to the typical peer's 25.3%. And finally, in terms of portfolio turnover, on a year-over-year basis, 23% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

Avantis Emerging Markets Value ETF earns an Above Average People Pillar rating. Daniel C. Ong, the longest-tenured manager on the strategy, provides strong guidance, bringing forward 19 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.9 stars, demonstrating underwhelming risk-adjusted performance. Daniel C. Ong draws on a supporting cast of four additional listed managers. Together they average seven years of listed portfolio management experience. As a team, they manage 30 investment vehicles together, with a Bronze asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha in aggregate. The management team is invested in the fund, but the maximum investment by any manager is between $100,000 and $500,000. An investment of more than $1 million would be ideal to align managers' interests with those of the fund's investors. 

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Above Average

People

An evolution is taking hold at American Century, but some pluses and minuses continue, supporting a continued Parent rating of Average.
The firm entered the ETF market in 2019 by launching Avantis Investors, led by former executives from Dimensional, a strong firm that manages semi-passive strategies with value tilts and low fees. Avantis is now running roughly a dozen ETFs with similar features, while American Century’s in-house teams manage another 16 active ETFs. This effort is still fairly new and small as a percentage of assets under management, as most ETFs have been launched since 2019, but they help American Century compete with lower-cost passive and strategic-beta funds.
The bulk of the firm’s assets remain in U.S. mutual funds run by its internal boutiques. The U.S. value team has long been a standout, with tenured, stable management and good long-term results, but other investment teams haven’t produced consistently distinctive portfolios or performance, and some have continued to endure investment-professional turnover.
The firm’s ownership structure is noteworthy and supports a long-term strategy. While the firm has worked with a few large minority shareholders, including current 41% stakeholder Nomura, The Stowers Institute for Medical Research owns 45% of the firm but holds 70% of the equity voting rights. Employees own the rest, which should encourage retention.

Parent

Avantis Emerging Markets Value ETF

AVES is an actively managed fund of emerging market equities with lower prices relative to their book values.

Avantis International Large Cap Value ETF

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Avantis Emerging Markets Value ETF holds about 1500 stocks listed in emerging markets and showing value and profitability characteristics. AVES is well diversified across holdings and sectors, shows attractive valuation metrics, and has performed quite well relative to peers. However, investors willing to limit geopolitical and regulatory risks would likely prefer ETFs excluding China.

AVES: Seeking Value And Profitability In Emerging Markets

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Emerging markets continued to expand at a solid pace midway into the first quarter of 2024, supported by broad-based expansion across both manufacturing and service sectors.

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The Case For Emerging Markets

Avantis International Small Cap Value ETF

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Avantis All International Markets Value ETF

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Avantis Emerging Markets Value ETF is an actively managed emerging markets value ETF with a cheap valuation and above-average dividends. The fund focuses on China, Taiwan, India, and South Korea, but overweighting China poses significant risks. AVES has a subpar performance track record but is managed by Avantis, a firm with a proven strategy in value investing.

AVES: Emerging Market Value Equities, Outstanding Potential Returns, Good Track Record

As fund managers rethink their strategy on emerging markets (EM), one consideration advisors and retail investors can consider is tilting toward value if they want to add EM assets to their portfolio. In particular, one exchange traded fund (ETF) worthy of consideration is the Avantis Emerging Markets Value ETF (AVES).

Tilt Toward Value in Emerging Markets With This ETF

Avantis Emerging Markets Value ETF holds about 1400 stocks with value and profitability characteristics. It is well diversified across holdings and sectors. Exposure to geopolitical and regulatory risks related to China is very high.

AVES: One Of The Best Among Peers, But Beware Of Geopolitics

As value spreads have reached all-time highs due to investors over-extrapolating growth, value stocks look extremely attractive. This is especially the case in emerging markets, where value is even cheaper, suggesting high expected returns for a combined emerging markets value strategy.

Avantis Emerging Markets Value ETF May Be Heavily Undervalued

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Avantis Emerging Markets Value ETF is an actively managed exchange-traded fund in emerging markets focused on value and profitability. AVES holds a large portfolio of 1300+ companies, mostly in Asia.

AVES: A Promising Emerging Markets ETF

News for Avantis Emerging Markets Value ETF ETF (AVES)