Avantis U.S. Mid 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 cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy’s management team earns an Above Average People Pillar rating. The strategy gets an Average Process Pillar rating.  High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. 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

Diamondback Energy

Vistra Energy

United Rentals

Royal Caribbean Cruises

Vertiv Holdings Co

Devon Energy

Arch Capital

Discover

Hartford Financial Services Group

Martin Marietta Materials

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. Mid Cap Equity ETF earns an Average Process Pillar rating. 

The most important driver of the rating is the firm's five-year retention rate of 84% over the period. The size of the portfolio management team also supports 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 deeper value plays than its peers’ average in the Mid-Cap Blend Morningstar Category. But in terms of size exposure, it is similar to the average. Looking at additional factor exposure, this strategy has consistently tilted toward companies with relatively higher trading volumes in the last 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. This strategy has had lower exposure to momentum stocks over peers in recent years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. High-yield stocks tend to be associated with more mature, profitable businesses that can grow as well as provide a stream of income. Such stocks could suffer, however, if setbacks force them to cut their dividends. In this month, the strategy also had more exposure to the Yield 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 financial services and energy relative to the category average by 3.1 and 2.9 percentage points, respectively. The sectors with low exposure compared to category peers are real estate and technology, with real estate underweighting the average portfolio by 4.9 percentage points of assets and technology similar to the average. The portfolio is positioned across 505 holdings and its assets are more dispersed than peers in the category. In particular, 7.0% of the portfolio's assets are concentrated in the top 10 fund holdings, compared to the category average's 15.4%.

Average

Process

Avantis U.S. Mid Cap Equity ETF earns an Above Average People Pillar rating. The team is backed by Daniel C. Ong, the longest-tenured manager on the strategy, who brings 19 years of listed portfolio management experience. 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, indicating the potential to deliver positive alpha in aggregate. None of the portfolio managers here invest in this fund. This hurts the rating because manager investment would align their interests with the strategy'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 US Mid Cap Equity ETF

AVMC seeks long-term capital appreciation through an actively managed portfolio of US mid-cap companies selected based on fundamental criteria.

Avantis US Mid Cap Value 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

KANSAS CITY, Mo. , Nov. 9, 2023 /PRNewswire/ -- Today, Avantis Investors ®, a $28 billion* investment offering from global asset manager American Century Investments®, continues to grow its exchange traded fund (ETF) platform with the listing of three new ETFs: Avantis U.S. Mid Cap Equity ETF (AVMC), Avantis U.S. Mid Cap Value ETF (AVMV) and Avantis Emerging Markets Small Cap Equity ETF (AVEE).

News for Avantis US Mid Cap Equity ETF ETF (AVMC)