Avantis U.S. Large Cap Equity 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 cheapest fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy merits an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a substantial overweight position in liquidity exposure and quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. 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

Microsoft

Apple

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JPMorgan Chase & Co

Exxon Mobil

Broadcom

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Avantis U.S. Large Cap Equity ETF earns an Average Process Pillar rating. 

The predominant contributor to the rating is the firm's five-year retention rate of 84% over the period. The size of the portfolio management team also bolsters the rating. 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 relatively low success ratio suggests that the firm could do better across its fund lineup.

 This strategy targets smaller plays than its peers’ average in the Large Blend Morningstar Category. But in terms of style (value/growth) exposure, it does not have much of a bias and resembles the category's typical portfolio. Examining additional factor exposure, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. The strategy has also had a defensive tilt, demonstrated by lower exposure to the quality factor than peers in recent years. This means the fund has avoided holding companies that are consistently profitable, growing, and have solid balance sheets. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This orientation tends to pay off most prominently when markets are hot. In this month, the strategy also had more exposure to the Volatility 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 energy by 3.4 percentage points in terms of assets compared with the category average, and its consumer cyclical allocation is similar to the category. The sectors with low exposure compared to category peers are healthcare and technology, with healthcare underweighting the average portfolio by 3.9 percentage points of assets and technology similar to the average. The portfolio is composed of 965 holdings and is less top-heavy than peers. Specifically, 23.8% of the strategy's assets are concentrated within the top 10 fund holdings, compared to the category’s 49.5% average.

Average

Process

Avantis U.S. Large Cap Equity ETF earns an Above Average People Pillar rating. Daniel C. Ong’s veteran status, with 19 years of listed portfolio management experience, brings a wealth of experience to the table. The strategies they currently manage have an average Morningstar Rating of 3.1 stars, demonstrating average risk-adjusted performance compared with category peers. 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 31 investment vehicles together, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha in aggregate. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders. 

 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 US Large Cap Equity ETF

AVLC is actively managed, investing in US large-cap stocks of companies perceived to have high-growth characteristics and attractive valuations. The fund aims for long-term capital appreciation.

It's easy to get caught up in the dogma of passive funds that provide core exposure to large caps. To get more dynamic exposure to the market that extends beyond rigidity, active funds can be of benefit.

Reap Large Cap Benefits With This Low-Cost Active ETF

Avantis International Small Cap Equity ETF

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American Century Investments subsidiary Avantis Investors has listed three new active equity ETFs on the New York Stock Exchange. All three funds emphasize companies with smaller market caps and higher profitability and value characteristics.

Avantis Rolls Out 3 Active Equity ETFs

Avantis Investors has launched the Avantis U.S. Large Cap Equity ETF (NYSE Arca: AVLC) on the New York Stock Exchange. AVLC invests primarily in a diverse group of U.S. companies across market sectors and industry groups.

Avantis Launches U.S. Large Cap Equity ETF

KANSAS CITY, Mo. , Sept. 28, 2023 /PRNewswire/ -- Avantis Investors ®, a $27 billion* investment offering from global asset manager American Century Investments®, further expands its investment capabilities with the launch of an exchange traded fund (ETF), its sixth new ETF this year.

News for Avantis US Large Cap Equity ETF ETF (AVLC)