Avantis’ Inflation-Fighting, Fund-of-Fund ETFs Launch
American Century unit departs from familiar strategy with new products.
Avantis Investors launched a pair of exchange-traded funds that break with the firm’s better-known investing methods.
The ETFs began trading Sept. 29 on the NYSE Arca. Both were trading slightly higher today.
The funds from Avantis, a unit of American Century Proprietary Holdings, include an ETF designed to alleviate the impact of inflation as well as an ETF-of-ETF.
Like the firm’s other funds, the Avantis All Equity Markets ETF (AVGE) and the Avantis Inflation Focused Equity ETF (AVIE) are actively managed. AVGE comes with an expense ratio of 0.23%, while AVIE charges 0.25%.
Avantis ETFs generally focus on broad asset classes and overweight companies with smaller size, higher profitability and strong value characteristics. Avantis’ Chief Investment Officer Eduardo Repetto was previously co-CEO of Dimensional Fund Advisors, which follows a similar investing strategy.
A Fund-of-Funds
AVGE will invest in existing Avantis ETFs: “managers will strategically allocate” to the different funds, the prospectus reads, with target weights set for different regions, based mainly on market capitalization. The fund will set U.S. allocation’s target weight at 70% of the portfolio.
Non-U.S. developed markets are targeted to represent 17% of the portfolio; emerging markets have a target weight of 10%, and an Avantis real estate ETF has a target weight of 3%.
At launch, the $2.4 billion Avantis U.S. Equity ETF (AVUS) represents 45% of AVGE’s portfolio.
Inflation-Fighting ETF
AVIE differs from other Avantis funds by drilling down to allocate at the sector and industry levels, targeting companies in areas expected to outperform in an inflationary environment. These might include financial services; petroleum and natural gas; metal and nonmetallic mining; health care; and consumer staples, the prospectus notes.
AVIE incorporates Avantis’ standard investment approach in terms of overweighting companies exhibiting specific factor exposures.
Its portfolio at launch includes 356 securities, with Berkshire Hathaway Inc., Exxon Mobil Corp. and Procter & Gamble Co. as its top three holdings.
Contact Heather Bell at [email protected]
