Avantis Investors’ active small-cap value ETF can be used to enhance portfolios.
The Avantis U.S. Small Cap Value ETF (AVUV) has historically provided better returns compared to the small-cap value benchmark, while also providing benefits such as growth potential and enhanced diversification.
AVUV invests in a broad set of U.S. small-cap companies, holding 770 securities as of June 24, according to ETF Database. The $11.2 billion fund is designed to increase expected returns by focusing on firms trading at low valuations with higher profitability ratios.
The fund pursues the benefits associated with indexing (diversification, low turnover, transparency of exposures). However, it also can add value by making investment decisions using information on current prices.
Growth Potential in Small-Cap Value
Small-cap companies present a compelling opportunity as they typically have more room to grow compared to large- and mega-cap names. The potential for higher growth may lead to attractive returns for investors.
Additionally, by focusing on small-cap value stocks, investors are getting exposure to the names that are trading for less than their true value. Targeting undervalued small-cap companies provides opportunities for further appreciation.
Active Performance Edge Compared to the Benchmark
Over time, undervalued stocks tend to revert to their true value, providing a return advantage. Coupled with the fact that small-cap stocks generally have more room to grow than their larger-cap peers, small-cap ETFs have historically offered compelling returns for patient investors.
AVUV’s methodology and quality active management have led the fund to handily outpace the benchmark over the trailing twelve months.
The Avantis small-cap value ETF has climbed 22.3% on a total return basis over one year trailing June 24. Meanwhile, the Russell 2000 Value is up 14.1%.
Year to date through June 24, AVUV has limited losses and held steady, increasing 0.2%. During the same period, the benchmark has declined 1.7%.
See more: “Make More Room for Midcap Investing”
Investors Don’t Have to Pay a Premium for Active Small-Cap Value
AVUV charges just 25 basis points, a competitive price for active management. The fund boasts an efficient portfolio management and trading process, which is designed to enhance returns with the goal of reducing unnecessary risks and costs for investors.
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