Avantis Core Municipal Fixed Inc ETF’s management team is rated Average, but a solid investment process 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 investment process inspires confidence and earns an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in AA rated bonds and debt with 10- to 15-year maturities compared with category peers. The strategy’s management team earns an Average People Pillar rating. 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

Morningstar's style-agnostic investment process evaluation looks for strategies that should be able to outperform their Morningstar Category index on a risk-adjusted basis over time. Avantis Core Municipal Fixed Income ETF earns an Above Average Process Pillar rating.    The most meaningful contributor to the rating is the firm's five-year retention rate of 83% over the period. The size of the portfolio management team also supports the process. With four portfolio managers, the fund is reasonably well-resourced. 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.

 Compared with other funds in the Muni National Interm Morningstar Category, this fund, historically, hews closely to peers' credit and interest-rate sensitivity over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Relative to the average strategy in the category, the managers have been overweight AA rated bonds in recent years. In the latest month, the strategy has relatively overweighted AA rated bonds compared with its peers as well. Additionally, there's been an overallocation to debt with 10- to 15-year maturities over the past few years. Compared with category peers, the strategy had more exposure to debt with 10- to 15-year maturities in the most recent month. Finally, during the past few years, the fund leaned away from corporate bonds. Nevertheless, the fund's corporate debt exposure was in line with peers in the latest month.

 This strategy's 12-month yield is 2.6%, lower than its average peers' 2.8%. In addition, it has a 3.3% 30-day SEC yield (a measure similar to yield-to-maturity). A lower yield tends to indicate lower credit risk. The portfolio has a higher average surveyed credit quality of AA, compared with the category average of A, and it holds no non-investment-grade assets, despite the average peers' 1%. Strategies with lower credit risk can typically withstand market turmoil more effectively.

Above Average

Process

Avantis Core Municipal Fixed Income ETF earns an Average People Pillar rating. The team is backed by Daniel C. Ong, the longest-tenured manager on the strategy, who provides 19 years of listed portfolio management experience. The strategies they currently manage have an average Morningstar Rating of 2.9 stars, demonstrating disappointing risk-adjusted performance compared with category peers. Daniel C. Ong draws on a supporting cast of three additional listed managers. Together they average nine years of listed portfolio management experience. As a team, they manage five investment vehicles together, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha in aggregate. The highest personal investment in this offering by any of its managers is at least $1 million. An investment of that size is large enough to align managers' interests with 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.

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 Core Municipal Fixed Income ETF

AVMU is actively managed to invest in investment-grade US municipal securities.

American Century Diversified Municipal Bond

The Federal Reserve standing pat on interest rates for the time being leaves the window open for fixed income investors to take advantage of current yields. That also includes muni bond exposure, but investors may want to take advantage before that proverbial window shuts.

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The anticipation of lower interest rates in the new year could bring a flash flood of new municipal bond issuance, according to Bond Buyer. If yields continue to fall and bond prices rise, it might be an opportune time to get muni bond exposure via two ETFs from American Century.

Rise in Muni Bond Issuance in 2024 Throws Spotlight on 2 ETFs

History tends to repeat itself and if that's the case in the current economic environment, then investors may want to side with muni bonds. American Century offers a pair of attractive, low-cost exchange traded fund options that allow for this exposure.

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Fixed income ETFs continue to gain in popularity, but not all investors are taking the same approach. For all of them, though, it is important to think about what advantages ETFs offer to client portfolios.

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As though rising rate volatility and recession fears weren't concerning enough for investors, the last week's bank run drama and instability has all eyes on the risk of contagion to the broader economy.

Credit Backdrop Adds to Muni ETF Appeal Amid Bank Drama

Count municipal bonds among the fixed income assets that are rebounding in the early stages of 2023. Fortunately for advisors and investors, municipal bonds' gains to start this year are modest and yields remain elevated, indicating there's plenty of potential upside ahead for this asset class.

Assess AVMU as Muni Bonds Rebound

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Fixed income is back, with the Fed's interest rate hikes stabilizing in a range that offers bonds at appealing yields not seen in years.

Upping a Core Muni Bond Allocation for 2023? Try AVMU

Avantis Core Fixed Income ETF

Bond yields have skyrocketed this week after the Federal Reserve announced its third consecutive rate hike of 0.75%. Treasury rates hit their highest levels in more than a decade on Friday morning, with the yield on the two-year Treasury reaching a new 15-year high on Friday, while the 10-year yield approached levels not seen since 2011.

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Municipal bonds could be falling back into favor for investors amid the volatility not only seen in the stock market, but also the bond market. One way to get exposure is via actively managed exchange traded funds (ETFs).

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Fixed income served as a strong diversifier in times of equity drawdowns over the past two decades — see the dot-com bubble and burst of the early 2000s and the global financial crisis of 2008.

Bonds, Especially Muni Bonds, Are Making a Comeback

With municipal yields on the rise, munis are starting to become attractive again. Research from Raymond James showed that yields for munis “saw sharp increases” last week, “with the entire AAA curve finishing the week higher by 18 to 20 basis points.

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Rising interest rates are plaguing various corners of the fixed income market and municipal bonds aren't immune from that ominous trend. However, there might be a silver lining for muni investors and that's important because munis are among the most widely held bonds by retail investors – either in individual issue or fund form – [.

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Rising interest rates hampered municipal bonds in the first quarter, but a lethargic start to 2022 for those high-quality bonds could bring a buying opportunity with this beloved income-generating asset class. Should munis come back into style, exchange traded funds such as the Avantis Core Municipal Fixed Income ETF (AVMU) stand to benefit.

Municipal Bonds Are Looking Interesting

A lengthy run of a bull market for equities and low interest rates helped shore up public pensions, and that's good news municipal bonds and the related exchange trade funds. The news gets even better for investors considering ETFs such as the Avantis Core Municipal Fixed Income ETF (AVMU).

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It's been a tough time for bonds. Fixed income markets were challenged in 2021, and with the Fed indicating that it could raise rates as many as three times this year, it looks as though 2022 won't be much better for the asset class.

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Municipal bonds (munis) have been a linchpin for advisors building effective, tax-efficient portfolios for their clients in this lower-for-longer yield environment. However, with a Fed taper almost a near-term certainty, a monolithic index approach to the sector may be unwise, and many investors are looking toward active strategies better equipped to adapt to the bond [.

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Truly active managers shine in challenging investment environments, especially when they are given a flexible mandate. With tax-loss harvesting, active investors can deliberately sell at a loss to offset taxes on gains elsewhere in a portfolio.

Muni Investors Stay Flexible As Rates Rise

Fixed income investors are looking into municipal bonds and their related exchange traded funds this year. Investment interest for the munis market has increased this year as rising taxes, the search for more attractive yields, and bets that states and municipalities would benefit from the new stimulus measures have all contributed to rising demand, MarketWatch [.

Will Municipal Bond ETFs Shatter Records in 2021?

Fixed income exchange traded fund investors seeking steady yields and lower tax rates can turn to municipal bond strategies. According to Municipal Market Analytics, investors have already funneled a net $39 billion into muni bond mutual funds this year through last Thursday, the most over the same period since 2008, the Wall Street Journal reports.

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On Thursday, following the launch of its first two fixed income ETFs in October, Avantis Investors, a $2.5 billion investment brand from global asset manager American Century Investments, announced the launch of its first low-cost, broadly diversified municipal bond fund, the Avantis Core Municipal Fixed Income ETF (AVMU). AVMU joins the Avantis Core Fixed Income ETF (AVIG) and the Avantis Short-Term Fixed [.

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News for Avantis Core Municipal Fixed Income ETF ETF (AVMU)