Avantis Responsible Emerging Mkts Eq 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 cheapest 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 an underweight position in quality exposure and has an overweight in momentum exposure compared with category peers. Low quality exposure is attributed to stocks with higher financial leverage and lower profitability. And momentum exposure is rooted in holding stocks currently on a winning streak. 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 Responsible Emerging Mkts Eq ETF earns an Average Process Pillar rating. 

The most important driver of the rating is the firm's five-year retention rate of 83% over the period. The size of the portfolio management team also contributes to 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 relatively low 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. Analyzing additional factors, this strategy tilts consistently toward stocks with lower quality or the shares of companies with more financial leverage and lower profitability, compared with Morningstar Category peers over the past few years. Such positions do not tend to provide much ballast for a portfolio. In the latest month, the strategy was also less exposed to the Quality factor compared with Morningstar Category peers. This strategy has had more exposure to high-momentum stocks over its peers in recent years. Momentum is based on the premise that stocks that have recently outperformed will continue to outperform, and those that have underperformed will stay behind. Compared with category peers, the strategy also had more exposure to the Momentum factor in the most recent month. Additionally, the managers have tended to overweight yield, shown by the portfolio's high exposure to stocks paying dividends or buying back shares. High-yield stocks tend to be connected to more mature companies earning enough cash to return some to shareholders. At times, however, extreme market pressure can force them to cut their dividends, which hurts stock performance. In recent months, however, the strategy had less Yield factor exposure 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 consumer cyclical relative to the category average by 3.1 and 2.7 percentage points, respectively. The sectors with low exposure compared to category peers are energy and consumer defensive, with energy underweighting the average portfolio by 4.9 percentage points of assets and consumer defensive similar to the average. The portfolio is positioned across 2,380 holdings and is diversified among those holdings. In its most recent portfolio, 15.3% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category’s 25.3% average. And finally, in terms of portfolio turnover, on a year-over-year basis, 7% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

Avantis Responsible Emerging Mkts Eq 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 2.9 stars, demonstrating disappointing risk-adjusted performance compared with category peers. Daniel C. Ong has an adequate backdrop of support, drawing on four additional listed managers, averaging 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, demonstrating their potential to deliver positive alpha in aggregate. The highest personal investment by any of the strategy's managers is between $10,000 and $50,000. That is too low to promote alignment of their interests with 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 Responsible Emerging Markets Equity ETF

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