Avantis Plans to Launch New Suite of Value Factor ETFs

The pending lineup

 The prospectus Avantis filed with the SEC lists a total of six factor ETFs, some of which have large-cap value and small-cap value tilts. They are:

• Avantis Total International Markets Equity ETF (AVTD): 0.31% expense ratio.
• Avantis Total International Markets Value ETF (AVTV): 0.34% expense ratio.
• Avantis U.S. Large Cap Equity ETF (AVLC): 0.15% expense ratio.
• Avantis All Equity Markets Value ETF (AVGV): 0.26% expense ratio.
• Avantis International Small Cap Equity ETF (AVDS): 0.30% expense ratio.
• Avantis Moderate Allocation ETF (AVMG): 0.21% expense ratio.

Some of these ETFs are designed to be complements to existing Avantis ETFs for investors and advisors constructing their own factor-tilted portfolios. For example, AVTD pairs well with the existing Avantis U.S. Equity ETF (AVUS), while AVTV goes hand-in-hand with the Avantis U.S. Large Cap Value ETF (AVLV).

AVMG is highly interesting. This ETF is essentially a AVGE with a 30-40% allocation to fixed income via the Avantis Short-Term Fixed Income ETF (AVSF) and the Avantis Core Fixed Income ETF (AVIG). With AVGM, investors are getting a 70/30 – 60/40 globally diversified ETF with a value and size factor tilt.

The other ETF worth examining further is AVGV, which I expect value factor investors to clamor over. While the existing AVGE has a decent size and value tilt, it may fall short for die-hard factor investors. AVGV solves that issue by allocating only to Avantis large and small-cap value ETFs from U.S., developed, and emerging markets.

My thoughts on the new ETFs

Avantis has clearly listened to investor demand. Their new lineup of ETFs not only makes factor investing more accessible, but also simpler. The launch of all-in-one factor ETFs with global diversification and a low expense ratio like AVGE, AVGV, and AVGM may go far as to convert passive, buy-and-hold index investors looking for an affordable way to beat the market.

The expense ratios are also very reasonable. Part of the problem with some factor ETFs is that high fees can negate the benefits of a long-term factor tilt. Like returns, fees compound. By keeping them low, Avantis can ensure better long-term net returns for its ETFs.

Make no mistake, these ETFs are actively managed. By buying them, investors are making a bet that Avantis' "secret sauce" to factor investing is not only effective but will persist in the future. That being said, I'm pretty confident in Avantis' ability to deliver factor investing properly given their ex-DFA affiliation and the reputation/track record of the latter.

Please note this article is for information purposes only and does not in any way constitute investment advice. It is essential that you seek advice from a registered financial professional prior to making any investment decision.