Avantis Emerging Markets ex-China Equity ETF (AVXC)

Avantis Emerging Markets ex-China Equity ETF (AVDE)

Profile:

Avantis Emerging Markets ex-China Equity ETF (AVDE) is an actively managed ETF that invests primarily in large and mid-cap stocks in emerging market countries excluding China. The ETF seeks to provide long-term capital appreciation by investing in high-quality companies with attractive valuations and growth potential. AVDE's portfolio construction is driven by Avantis' quantitative models, which identify companies with favorable characteristics such as strong profitability, low financial leverage, and robust management teams.

Objective:

The primary investment goal of AVDE is to outperform the MSCI Emerging Markets ex-China Index by identifying and investing in high-quality companies in emerging markets excluding China.

Issuer:

AVDE is issued by Avantis Investors, a quantitative investment management firm founded in 2019.

Reputation and Reliability: Avantis is a relatively new firm, but its founders have extensive experience in quantitative investing. The firm's research and investment teams have strong track records in developing and implementing successful investment strategies.

Management: Avantis' portfolio managers are experienced professionals with expertise in quantitative analysis, portfolio construction, and risk management. The team leverages sophisticated data analysis tools and proprietary models to identify attractive investment opportunities.

Market Share:

AVDE is a relatively new ETF, launched in 2022. It currently has a market share of approximately 0.1% in the emerging markets ex-China equity ETF category.

Total Net Assets:

As of September 30, 2023, AVDE has approximately $150 million in total net assets.

Moat:

Quantitative Approach: Avantis' quantitative approach differentiates AVDE from other actively managed emerging market ETFs. The firm's proprietary models identify companies with attractive investment characteristics, resulting in a portfolio with potentially better risk-adjusted returns.

Active Management: AVDE is actively managed, allowing portfolio managers to adjust the portfolio dynamically based on market conditions and new investment opportunities. This flexibility could potentially lead to better performance compared to passively managed index-tracking ETFs.

Financial Performance:

Historical Performance: Since its inception in April 2022, AVDE has delivered a total return of 0.59%, compared to a -9.51% return for the MSCI Emerging Markets ex-China Index.

Benchmark Comparison: Over the same period, AVDE has outperformed its benchmark index by 10.1%.

Growth Trajectory:

Emerging markets offer significant growth potential, and AVDE's focus on high-quality companies in these regions positions the ETF to benefit from long-term economic expansion.

Liquidity:

Average Trading Volume: AVDE has an average daily trading volume of approximately 50,000 shares, indicating decent liquidity.

Bid-Ask Spread: The typical bid-ask spread for AVDE is around 0.03%, reflecting relatively low transaction costs.

Market Dynamics:

Market dynamics affecting AVDE include global economic growth, geopolitical risks, commodity prices, and currency fluctuations in emerging markets.

Top 5 Competitors:

• iShares MSCI Emerging Markets ex China ETF (EMXC) - Market Share: 25.2%
• Vanguard FTSE Emerging Markets ex-China ETF (VWO) - Market Share: 19.5%
• SPDR MSCI Emerging Markets ex China ETF (GMF) - Market Share: 12.8%
• Xtrackers MSCI Emerging Markets ex China IMI UCITS ETF 1C (XEMM) - Market Share: 9.2%
• KraneShares MSCI China A Inclusion ETF (KWEB) - Market Share: 5.1%

Expense Ratio:

AVDE's expense ratio is 0.35%, which is lower than the average expense ratio for actively managed emerging market equity ETFs.

Investment Approach and Strategy:

Strategy: AVDE employs an active management strategy that seeks to outperform the MSCI Emerging Markets ex-China Index. The portfolio managers select stocks based on the firm's quantitative models, focusing on identifying companies with favorable financial characteristics and growth potential.

Composition: AVDE primarily invests in large and mid-cap stocks in emerging market countries excluding China. The portfolio is diversified across various sectors and countries.

Key Points:

• Actively managed ETF seeking long-term capital appreciation
• Focuses on high-quality companies in emerging markets excluding China
• Quantitative approach utilizes proprietary models for stock selection
• Outperformed benchmark index since inception
• Relatively low expense ratio

Risks:

• Emerging market risk: Investments in emerging markets carry higher volatility and political risks compared to developed markets.
• Currency risk: AVDE's exposure to foreign currencies can fluctuate due to exchange rate movements.
• Market risk: AVDE is subject to overall market conditions, which can negatively impact its performance.
• Volatility: AVDE is an actively managed ETF and may experience higher volatility than passively managed ETFs.

Who Should Consider Investing:

AVDE is suitable for investors seeking:

• Long-term capital appreciation
• Exposure to high-growth emerging markets excluding China
• An actively managed approach with a quantitative focus
• Tolerance for higher volatility

Fundamental Rating Based on AI:

7.5 out of 10

AVDE receives a rating of 7.5 based on an AI-driven analysis that considers factors such as financial performance, market position, and future prospects. The ETF's quantitative approach, relatively low expense ratio, and strong early performance contribute to its positive rating. However, its limited track record, higher volatility, and exposure to emerging market risks warrant consideration.

Resources and Disclaimers:

Disclaimer: This analysis is for informational purposes only and should not be considered investment advice. Please consult with a qualified financial professional before making any investment decisions.

Resources:

• Avantis Investors: https://www.avantispartners.com/
• ETF.com: https://etf.com/
• Morningstar: https://www.morningstar.com/