Avantis Responsible US 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 volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. 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 benchmark on a risk-adjusted basis over the long term. Avantis Responsible US Equity ETF earns an Average Process Pillar rating. 

The main driver of 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 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 modest success ratio suggests that the firm could do better across its fund lineup.

 This strategy skews toward smaller, more undervalued companies compared with its average peer in the Large Blend Morningstar Category. Looking at additional factor exposure, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to experience a significant loss. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in companies that have a higher historical standard deviation of returns. This contributes to a higher-risk, higher-reward approach. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. In addition, this strategy's holdings have included more companies with high dividend or buyback yields than peers over these years. Higher-yield stocks can provide steady income, but also have their risks. Dividend payers may cut payouts, for instance, if their earnings fall. 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 consumer cyclical relative to the category average by 5.7 and 4.7 percentage points, respectively. The sectors with low exposure compared to category peers are energy and healthcare, with energy underweighting the average portfolio by 3.9 percentage points of assets and healthcare similar to the average. The portfolio is positioned across 1,298 holdings and is diversified among those holdings. In its most recent portfolio, 22.5% of the portfolio's assets were concentrated in the top 10 fund holdings, compared to the category average's 48.8%. And finally, in terms of portfolio turnover, on a year-over-year basis, 4% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

Avantis Responsible US Equity ETF earns an Above Average People Pillar rating. Daniel C. Ong, the longest-tenured manager on the strategy, boasts 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 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, 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 Responsible US Equity ETF

AVSU actively invests in US companies of all market capitalizations. Holdings are screened for multiple ESG metrics and selected based on fundamental criteria. 

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Merge Returns and ESG in Active ESG ETF AVSU

Avantis Responsible International Equity ETF

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Invest Responsibly With These ETFs

Avantis Investors, a $10 billion investment offering from global asset manager American Century Investments, today announced the launch of its third environmental, social, and governance exchange traded fund: the Avantis Responsible Emerging Markets Equity ETF (NYSE Arca: AVSE). The fund, which launches today on the New York Stock Exchange, invests primarily in a diverse group [.

Avantis Investors Launches Third ESG ETF With AVSE

Avantis Investors, a $9.2 billion investment offering from global asset manager American Century Investments, today launched two new funds based on feedback and demand from clients. The Avantis Responsible U.S. Equity (AVSU) and the Advantis Responsible International Equity (AVSD) each listed on the NYSE on March 17 with expense ratios of 15 basis points and [.

News for Avantis Responsible US Equity ETF ETF (AVSU)