A few months ago when I wrote the article “ETF Wishlist for DIY Investors” (as a collaboration with friends from #FinTwit) one of the most repeated suggestions was for a fund that offered global core equity and factor tilts (especially value) in one neat package.
Basically, an all-in-one global fund that offered the best of both worlds – core equity and factor exposure.
Being able to fulfill “all of your equity desires” in one fund has remained elusive for most sophisticated DIY investors and savvy advisors who have had to cobble together several funds in order to tick-off all of the boxes.
For instance, imagining a scenario where you wanted a global market-cap weighted strategy plus value funds to represent all of the major markets including US, International and Emerging.
You’d likely be looking at solutions such as VT ETF (Vanguard Total World Stock Index Fund ETF) for your market-cap weighted exposure and then three separate value funds (US/Int-Dev/EM) to round out your factor focused mandate.
Jeez Louise, wouldn’t it sure be nice to have one fund that could do all of that?
Enter the room Avantis All Equity Markets ETF (ticker: AVGE).
Freshly minted AVGE ETF is the first global fund that I’m aware of that attempts to bring everything together under one hood that balances the demands for both “core equity” and “multi-factor” mandates as a total package solution.
As a fund of funds it manages to squeeze 10 of its equity ETF ingredients into a super-sandwich.
Why a Super Fund of Funds?
Why do all of this?
The folks over at Avantis give four distinct reasons:
- “This strategy is designed to provide exposure to a broadly diversified set of companies, sectors and countries while emphasizing securities with higher expected returns. The strategy pursues its objective through investing in a series of other Avantis exchange-traded funds (ETFs).”
- It pursues the benefits associated with indexing (diversification, low turnover, transparency of exposures) but with the ability to add value by making investment decisions using information in current prices.
- “Efficient portfolio management and trading process that are designed to enhance returns while seeking to reduce unnecessary risks and transaction costs.”
- “This strategy is built to provide an investor with an effective total-market equity allocation.”
What immediately comes to mind is that if you can solve all of your equity needs with one fund it allows you to focus more on the “other sleeves” of your portfolio such as fixed income and alternatives.
However, there are at least three potential problems that could arise from an all in-one fund that tries to do it all.
- Does it have strong enough factor tilts (especially towards value) to satisfy staunch value investing enthusiasts?
- Does it provide enough “core exposure” for those leaning more towards indexing solutions?
- Does it satisfy the global asset allocation of US, International Developed and Emerging Markets in a manner that is palatable for most investors?
We’ll do our best to examine and unpack these concerns in this ETF review.
AVGE ETF Review | Avantis All Equity Markets ETF Fund Review
Hey guys! Here is the part where I mention I’m a travel content creator! This investing opinion blog post ETF Fund Review is entirely for entertainment purposes only. There could be considerable errors in the data I gathered. This is not financial advice. Do your own due diligence and research. Consult with a financial advisor.
source: New York Stock Exchange YouTube
Avantis ETFs: The Top Value Funds For Investors?
In little over 3 years Avantis Investors has managed to jockey for a position as one of (if not the best) value investing firms for DIY investors.
From an entirely subjective experience on social media I’m hard-pressed to think of “value ETFs” that are more recommended than the likes of AVUV (Avantis U.S. Small Cap Value ETF), AVDV (Avantis International Small Cap Value ETF) and AVES (Avantis Emerging Markets Value ETF).
Objectively, this reality is confirmed by several of those funds amassing Billions of dollars in AUM.
AVUV ETF = 3.2 Billion
AVDV ETF = 2.0 Billion
Thus, the table has been set for a newly minted fund such as AVGE ETF to succeed.
However, investors historically have oddly been less keen to adopt “global” products.
This baffles my mind.
AVGE ETF Overview, Holdings and Info
As mentioned previously, AVGE ETF is a super fund of funds in the sense that it packs 10 underlying ETFs in its suitcase.
Hence, it’s a 10-1 fund.
Let’s pop the hood to examine all of the goodies we’ve got inside.
AVGE Exposures Sorted By Geography
| COMPANY | TICKER | CUSIP | ISIN | SECTOR | MARKET VALUE ($) | WEIGHT |
|---|---|---|---|---|---|---|
| Avantis Emerging Markets Equity ETF | AVEM | 025072604 | US0250726041 | Diversified | 2,377,287.22 | 5.67% |
| Avantis Emerging Markets Value ETF | AVES | 025072372 | US0250723725 | Diversified | 1,598,858.64 | 3.81% |
| Avantis International Equity ETF | AVDE | 025072703 | US0250727031 | Diversified | 4,265,279.20 | 10.17% |
| Avantis International Large Cap Value ETF | AVIV | 025072364 | US0250723642 | Diversified | 2,165,792.20 | 5.16% |
| Avantis International Small Cap Value ETF | AVDV | 025072802 | US0250728021 | Diversified | 857,055.04 | 2.04% |
| Avantis Real Estate ETF | AVRE | 025072356 | US0250723568 | Real Estate | 1,195,288.92 | 2.85% |
| Avantis U.S. Small Cap Value ETF | AVUV | 025072877 | US0250728773 | Diversified | 2,190,733.38 | 5.22% |
| Avantis US Equity ETF | AVUS | 025072885 | US0250728856 | Diversified | 18,718,224.00 | 44.61% |
| Avantis US Large Cap Value ETF | AVLV | 025072349 | US0250723493 | Diversified | 6,492,731.70 | 15.47% |
| Avantis US Small Cap Equity ETF | AVSC | 025072323 | US0250723238 | Diversified | 2,120,141.40 | 5.05% |
Directly from the AVGE ETF Prospectus we’re able to notice the following: “target weight” vs “target range”
AVGE Target Weight
US Equity = 70%
International Developed = 17%
Emerging Markets = 10%
Sector Equity = 3%
AVGE Target Range
US Equity = 63 to 77%
International Developed = 10-24%
Emerging Markets = 3-17%
Sector Equity = 1-6%
Now here is where we cannot please all investors.
Some will seek “greater exposure” to International Developed and Emerging Markets!
They’d likely prefer a 50/35/15 split between US, International and Emerging Markets.
On the other hand, you’ll find those investors that don’t feel the “slight home country bias” is enough!
They’d prefer 80/15/5.
And then you’ll find those who are “super contrarian” and want all three markers split evenly.
33/33/33 or 40/30/30.
This is clearly where going “global” will not tickle the subjective fancy of all.
And this is the primary reason why many investors prefer splitting up US, International and Emerging markets exposure into separate funds in order to allocate to personal taste.
I’m of the opinion the allocations (especially the target range) are acceptable but I’d be leaning more towards greater exposure to Int-Dev and EM versus US markets.
It’s by no means a deal-breaker though.
AVGE ETF Info
Ticker: AVGE
Net Expense Ratio: 0.23
Distributions: Semi-Annual
AUM: 37.9 Million
Inception: 09/27/2022
Considering the fund is less than 2 months old, I’m impressed by the AUM it has been able to accumulate.
Although it’s not over the threshold of 50 Million (that seems to keep a fund safe from the executioner) it is well on its way.
The management fee of an all-in-cost of 0.23 is very reasonable in my opinion for a 10-1 fund.
Militant low-cost indexers will likely disagree but those who aren’t trying to shave the cat to the bone are probably “just fine” with it.
Avantis All Equity Markets ETF Fund: Principal Investment Strategy
To better understand the process of how the fund operates, let’s turn our attention towards the prospectus where I’ve summarized the key points at the very bottom (source: summary prospectus).
Principal Investment Strategies of the Fund
The underlying funds represent a broadly diversified basket of equity securities that seek to overweight securities that are expected to have higher returns or better risk characteristics than a passive, market-cap weighted index.
The following table indicates the fund’s target weight and range for allocation among the fund’s major asset classes and shows the underlying funds that comprise each asset class.This information is as of the date of this prospectus.
| Target Weight | Target Range | |||||||
U.S. Equity | 70% | 63% to 77% | ||||||
Avantis U.S. Equity ETF | ||||||||
Avantis U.S. Small Cap Equity ETF | ||||||||
Avantis U.S. Large Cap Value ETF | ||||||||
Avantis U.S. Small Cap Value ETF | ||||||||
| Target Weight | Target Range | |||||||
Non-U.S. Developed Markets | 17% | 10% to 24% | ||||||
| Avantis International Equity ETF | ||||||||
| Avantis International Large Cap Value ETF | ||||||||
| Avantis International Small Cap Value ETF | ||||||||
| Emerging Markets | 10% | 3% to 17% | ||||||
Avantis Emerging Markets Equity ETF | ||||||||
Avantis Emerging Markets Value ETF | ||||||||
Sector Equity | 3% | 1% to 6% | ||||||
Avantis Real Estate ETF | ||||||||
Under normal market conditions, the fund will invest at least 80% of its assets in equity ETFs.
The managers will strategically allocate to the underlying funds across geographies and investment styles to achieve the desired allocation.
The U.S. vs. non-U.S. allocations across geographies will be predicated on each region’s relative market capitalization with a home bias toward the U.S. The portfolio managers regularly review the fund’s allocations to determine whether rebalancing is appropriate.
To better balance risks in changing market environments and control costs and tax realizations, the portfolio managers may allocate within the target range in light of prevailing market conditions and relative performance.
We reserve the right to modify the target ranges and underlying funds from time to time should circumstances warrant a change.
The fund is an actively managed exchange-traded fund (ETF) that does not seek to replicate the performance of a specified index.The portfolio managers continually analyze market and financial data to make buy, sell, and hold decisions.”
AVGE ETF – Sector Exposure
What’s immediately apparent about Avantis All Equity Markets Equity ETF is that it spreads out nicely from a sector exposure perspective.
I love that no sector reaches 20%!
You’ll notice AVGE ETF is overweight energy, industrials, real estate, basic materials and financial services.
On the other hand, it’s underweight healthcare, technology, consumer defensive and communication services.
Overall, I’m impressed with the sector exposure the fund offers with across the board coverage to everything.
AVGE ETF – Style Measures
Here is where AVGE shines relative to typical Market-Cap Weighted indexes from the perspective of value and growth measures.
It has a huge advantage in Price/Earnings with 10.51 versus the Category Average of 17.21.
It offers across the board more attractive measures for P/B, P/S and P/Cash Flow (where lower is better) and Dividend Yield (where higher is better).
Noteworthy, is the funds relatively impressive Cash-Flow Growth % where it reigns supreme versus typical market-cap weighted index.
Overall, AVGE ETF looks mighty impressive across the board for a core meets factor fund.
AVGE ETF – Stock Style
An immediate feather in the cap of AVGE ETF is that it offers considerably more small-cap and mid-cap exposure than typical market-cap weighted products that tend to be top heavy.
Overall, it tilts towards value with 49% versus 19% allocated to growth.
Its spreads out nicely with 21% small-cap, 26% mid-cap and 54% large-cap.
As with geographical allocations, AVGE ETF isn’t going to please all investors with its stock style configurations.
For instance, small-cap investors likely won’t bite.
However, I think the fund strikes a nice balance by covering all of its bases.
AVGE ETF – Factor Profile
AVGE offers solid across the board multi-factor exposure to value, size, momentum and yield versus category averages.
Often the biggest criticism of “vanilla market cap weighted funds” is that they don’t offer any significant factor exposure.
Yet Avantis All Equity Markets ETF is able to buck the trend.
AVGE ETF Alpha Architect Screening
Finally let’s consult the invaluable Alpha Architect Fund Screener for a comparison of AVGE ETF vs VT ETF.
EBIT/TEV: 9.93% vs 6.10%
Earnings/Price: 8.42% vs 5.60%
Momentum (2-12): -8.96% vs -16.94%
Returns on Assets: 9.63% vs 8.80%
It’s an impressive win across the board for AVGE ETF versus VT ETF.
Avantis All Equity Markets ETF Performance
This fund was just released so its performance has to be taken with a grain of salt.
However, it has offered investors more than 200+ basis points of higher returns relative to VT since its inception.
I’ll update the article at a future date to better reflect its performance over time.
AVGE ETF Pros and Cons
Let’s examine the pros and cons of Avantis All Equity Markets ETF.
AVGE ETF Pros
- 10 in 1 fund providing a truly global equity solution for investors seeking a core fund with multi-factor tilts (especially value)
- The possibility for this fund to be a one fund solution for your equity exposure allowing you to focus upon other areas of your portfolio
- Significant mid-cap and small-cap exposure versus other “vanilla” market-cap weighted products
- Exposure to International and Emerging Markets to avoid “home country bias”
- Very reasonable net expense ratio of 0.23
- Potentially tax-efficient for US based investors (I’m Canadian so this is not an area of expertise)
- Adaptability to shift exposures geographically (could be considered a con by some)
AVGE ETF Cons
- Maybe not enough “global diversification” to satisfy certain investors that want 50-60% or less US equity exposure
- Potentially “too watered down” by its core equity allocations and not enough small-cap exposure to appease value investors
What Others Have To Say About AVGE ETF
Prior to completing this article I asked friends on Twitter to express their thoughts on Avantis All Equity Markets ETF with some great responses.
“I like the expense ratio, global diversification, tax efficiency, simplicity, and factor tilts. I like a little deeper tilts myself, but can’t complain!” – @MarkTMeredith
“Well said. It is an amazing fund and in my view, the best one-fund solution out there. Rumor is that the fund-of-funds structure gives US investors the benefit of foreign tax credits, something that even the competition in $VT doesn’t do.” – @HML_Compounder
“Love: The cost:benefit as @MarkTMeredith discussed already. The systematic, quantitative approach Dislike: The lack of clarification regarding the shifting weights (as far as I know this hasn’t been clarified). Emerging Markets exposure for at-best similar returns to S&P.”
– @DominantPort
“Waiting for UCITS version of the fund 🙏” – @MaciejWasek
AVGE Potential Portfolio Solutions
Now that we’ve taken a thorough look at AVGE let’s see how it can potentially fit into a portfolio at large.
100% ALL Equity Portfolio
Are you an all-equity investor?
Seeking a one-click solution for you portfolio?
Boom!
AVGE ETF and out.
100% AVGE.
Diversified Quant Portfolio
Here is a portfolio idea for the diversified quant:
60% AVGE ETF
20% KMLM ETF
10% LBAY ETF
10% TYA ETF
Here you’ve got your global equity solution covered with AVGE and you’ve introduced efficient treasury coverage with TYA (3X exposure) allowing you to also add trend-following managed futures (KMLM ETF) and a long-short equity strategy (LBAY ETF) to your portfolio.
Market-Cap Weighted Portfolio
If you’re committed to a market-cap weighted portfolio but want to dip your toes into the factor pond you might consider this allocation:
40% VT
20% AVGE
40% AGG
You’ve still got your 60/40 Portfolio with a small slice of factor exposure.
Nomadic Samuel Final Thoughts
There is a lot to love about Avantis All Equity Markets ETF!
Its one of the first ETFs to take a crack at being a truly global fund that blends core and factor (value) strategies together while offering significant small-cap and mid-cap exposure.
Yet, does it have enough “global exposure” to lure investors committed to avoiding home country bias?
Are the value tilts enough to lure in hardcore value investors?
Only time will tell.
But I do applaud Avantis for taking a stab at this kind of product as there definitely appears to be enough of a demand for it.
Overall, I’m impressed.
Now over to you.
What do you think of Avantis All Equity Markets ETF?
Is it on your radar?
Please let me know in the comments below.
Important Information
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No thanks, but so appreciate the review. I already have plenty VT that I will never move from. My SCV is a 33% AVUV/AVDV/AVES. What I really want is a single global SCV only fund but that doesn’t exist…
You might be happy to learn that avantis is going to release Just that in July I believe . Stay tuned !
I think its great. I like the concept of set it and forget it but always thought some of the broadly diversified funds had too much junk in them. For instance, 2022 saw VTI have a bigger drawdown than VOO. Mainly because there are quality screens in VOO that VTI doesn’t have. I guess time will tell if AVGE works out.
Unless someone is super picky, there’s very little to complain about in my view. It’s my understanding simplicity and diversification are most important to investing success.I think this fund is just about perfect for US investors. A total global market fund with moderate factors tilts and what seems like an appropriate amount of US home country bias, all in one fund.
My portfolio is this fund (AVGE) and Vanguard Total World Bond Fund (BNDW). With just these two funds I feel like I’m thoroughly well diversified in both stocks and bonds. Simplicity and diversification. What more could I want?