New Avantis ETFs

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Nathan Drake
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Re: New Avantis ETFs

Post by Nathan Drake »

One More Thing wrote: Wed Sep 22, 2021 5:11 pm While Avantis receives praise I notice that their ETFs are actively managed. How does one reconcile this with being a Boglehead?
It’s systematic management with low expenses. Low turnover, broad diversification.

The term “active” doesn’t have much meaning without context. The S&P 500 is also an active index, requiring decisions in when to add/remove companies from the index

I think it’s completely compatible with Boglehead investing
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
One More Thing
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Re: New Avantis ETFs

Post by One More Thing »

Nathan Drake wrote: Wed Sep 22, 2021 5:40 pm
One More Thing wrote: Wed Sep 22, 2021 5:11 pm While Avantis receives praise I notice that their ETFs are actively managed. How does one reconcile this with being a Boglehead?
It’s systematic management with low expenses. Low turnover, broad diversification.

The term “active” doesn’t have much meaning without context. The S&P 500 is also an active index, requiring decisions in when to add/remove companies from the index

I think it’s completely compatible with Boglehead investing
Ah, okay. I did not consider such nuance. So their strategies are set by the managers but once set they behave like a passively managed portfolio?
Nathan Drake
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Re: New Avantis ETFs

Post by Nathan Drake »

One More Thing wrote: Wed Sep 22, 2021 6:04 pm
Nathan Drake wrote: Wed Sep 22, 2021 5:40 pm
One More Thing wrote: Wed Sep 22, 2021 5:11 pm While Avantis receives praise I notice that their ETFs are actively managed. How does one reconcile this with being a Boglehead?
It’s systematic management with low expenses. Low turnover, broad diversification.

The term “active” doesn’t have much meaning without context. The S&P 500 is also an active index, requiring decisions in when to add/remove companies from the index

I think it’s completely compatible with Boglehead investing
Ah, okay. I did not consider such nuance. So their strategies are set by the managers but once set they behave like a passively managed portfolio?
Correct. They have rules for selecting companies to invest in that meet the Price/Book and Profitability factor screens that look attractive and when companies get added/deleted they use momentum (ex: if a company is starting to look overvalued it will still hold onto it outside their bands if it's showing increasing momentum, and similarly if a company is at the margins of the screens and shows negative momentum it will exit the position).
S&P 500 employs its own screens (company most be profitable for a few quarters, etc) and then a board votes on adding/deleting companies.

This is unlike a typical "active" fund that may just be involved in individual stock picking and have higher concentration with benchmarks that may be hard to quantify.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
One More Thing
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Re: New Avantis ETFs

Post by One More Thing »

Nathan Drake wrote: Wed Sep 22, 2021 6:39 pm Correct. They have rules for selecting companies to invest in that meet the Price/Book and Profitability factor screens that look attractive and when companies get added/deleted they use momentum (ex: if a company is starting to look overvalued it will still hold onto it outside their bands if it's showing increasing momentum, and similarly if a company is at the margins of the screens and shows negative momentum it will exit the position).
S&P 500 employs its own screens (company most be profitable for a few quarters, etc) and then a board votes on adding/deleting companies.

This is unlike a typical "active" fund that may just be involved in individual stock picking and have higher concentration with benchmarks that may be hard to quantify.
I like it. Thank you for explaining it. Looks like I have more to consider yet. Still wrestling with deciding between full TSM and factor tilting.
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grabiner
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Re: New Avantis ETFs

Post by grabiner »

One More Thing wrote: Wed Sep 22, 2021 5:11 pm While Avantis receives praise I notice that their ETFs are actively managed. How does one reconcile this with being a Boglehead?
The main reasons for indexing is not an inherent advantage of an index, but its low costs, known strategy (some actively-managed value funds may switch to growth stocks), and in a taxable account, the low tax cost. An active fund that meets these goals is just as good as an index. Many Bogleheads hold Vanguard's non-index muni funds, or hold funds such as Wellington and Wellesley in IRAs.

The "actively managed" factor ETFs from Avantis and other providers meet the same goals. The costs are still reasonably low. The strategy is consistent, as it is defined by the ETF; a value-factor ETF will hold stocks with strong exposure to value. And the ETF structure avoids the tax issues with fund turnover.
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Re: New Avantis ETFs

Post by gtwhitegold »

I'm curious how strong the factor loads will be on AVES. If it looks like they'll be pretty strong, then I'll probably move some of my EM allocation from FEMS to AVES. If not, then I'll just keep on waiting for a better EMV or EMSCV Fund.
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tarnation
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Re: New Avantis ETFs

Post by tarnation »

gtwhitegold wrote: Wed Sep 22, 2021 9:45 pm I'm curious how strong the factor loads will be on AVES. If it looks like they'll be pretty strong, then I'll probably move some of my EM allocation from FEMS to AVES. If not, then I'll just keep on waiting for a better EMV or EMSCV Fund.
FEMS does not look that great. 0.8% for 200 stocks. Not great Vol. and what with that spike in premium/ discount chart.
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Re: New Avantis ETFs

Post by gtwhitegold »

tarnation wrote: Wed Sep 22, 2021 10:56 pm
gtwhitegold wrote: Wed Sep 22, 2021 9:45 pm I'm curious how strong the factor loads will be on AVES. If it looks like they'll be pretty strong, then I'll probably move some of my EM allocation from FEMS to AVES. If not, then I'll just keep on waiting for a better EMV or EMSCV Fund.
FEMS does not look that great. 0.8% for 200 stocks. Not great Vol. and what with that spike in premium/ discount chart.
I feel like it's the cleanest dirty shirt as far as what I want in an EM fund. It's smaller and loads a good bit more on quality and momentum than DGS, but slightly less on value, but it positively loads on value, so overall it has better factor loads. I feel that it's worth the slightly higher ER over DGS since it's more aligned with what I want in a EM fund. I'm not too worried about the liquidity in the fund since I'm only adding to it at this time and I only make a couple of purchases each year. I obviously would like a better EMSC fund with positive factor loads, but I'm just using the tools available to make what I think is the best decision for me.
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typical.investor
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Re: New Avantis ETFs

Post by typical.investor »

Nathan Drake wrote: Wed Sep 22, 2021 6:39 pm
One More Thing wrote: Wed Sep 22, 2021 6:04 pm
Nathan Drake wrote: Wed Sep 22, 2021 5:40 pm
One More Thing wrote: Wed Sep 22, 2021 5:11 pm While Avantis receives praise I notice that their ETFs are actively managed. How does one reconcile this with being a Boglehead?
It’s systematic management with low expenses. Low turnover, broad diversification.

The term “active” doesn’t have much meaning without context. The S&P 500 is also an active index, requiring decisions in when to add/remove companies from the index

I think it’s completely compatible with Boglehead investing
Ah, okay. I did not consider such nuance. So their strategies are set by the managers but once set they behave like a passively managed portfolio?
Correct. They have rules for selecting companies to invest in that meet the Price/Book and Profitability factor screens that look attractive and when companies get added/deleted they use momentum (ex: if a company is starting to look overvalued it will still hold onto it outside their bands if it's showing increasing momentum, and similarly if a company is at the margins of the screens and shows negative momentum it will exit the position).
It'll be interesting to see how it works out. You know I mean say an industry struggles like energy and profits fall. You very well might see negative momentum for a while until recovery. I guess price/book would be lower so maybe they would retain it. Or would they drop it due to profitability and momentum?
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Re: New Avantis ETFs

Post by Nathan Drake »

typical.investor wrote: Thu Sep 23, 2021 1:20 am
Nathan Drake wrote: Wed Sep 22, 2021 6:39 pm
One More Thing wrote: Wed Sep 22, 2021 6:04 pm
Nathan Drake wrote: Wed Sep 22, 2021 5:40 pm
One More Thing wrote: Wed Sep 22, 2021 5:11 pm While Avantis receives praise I notice that their ETFs are actively managed. How does one reconcile this with being a Boglehead?
It’s systematic management with low expenses. Low turnover, broad diversification.

The term “active” doesn’t have much meaning without context. The S&P 500 is also an active index, requiring decisions in when to add/remove companies from the index

I think it’s completely compatible with Boglehead investing
Ah, okay. I did not consider such nuance. So their strategies are set by the managers but once set they behave like a passively managed portfolio?
Correct. They have rules for selecting companies to invest in that meet the Price/Book and Profitability factor screens that look attractive and when companies get added/deleted they use momentum (ex: if a company is starting to look overvalued it will still hold onto it outside their bands if it's showing increasing momentum, and similarly if a company is at the margins of the screens and shows negative momentum it will exit the position).
It'll be interesting to see how it works out. You know I mean say an industry struggles like energy and profits fall. You very well might see negative momentum for a while until recovery. I guess price/book would be lower so maybe they would retain it. Or would they drop it due to profitability and momentum?
Hard to say because the methodology isn’t public, however turnover in the fund is small so whatever system they have in place can allow for quite a bit of drift.

They can also load more heavily on certain stocks that may not be great in terms of P/B but may have strong profitability and vice versa.
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tryingmybest
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Re: New Avantis ETFs

Post by tryingmybest »

Although the bottom line Avantis expense ratio is smaller, does effective cost ranking change after taking securities lending into account? Emerging Markets Small Cap Portfolio DEMSX currently has a net expense ratio of 0.60%:
https://us.dimensional.com/funds?filters=equity

In 2012 its securities lending profit was 0.35% (I don't know how to find figures for this year).
https://www.advisorperspectives.com/new ... _Funds.pdf

If we take these figures as current, then the effective ratio is 0.25%. DEMSX is one of the more expensive DFA funds.

How does Avantis compare?

Here is an earlier Bogleheads.org discussion on securities lending:
viewtopic.php?t=227579
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Re: New Avantis ETFs

Post by DanLeeRot »

FYI......The new Avantis US Large Cap Value (AVLV) ETF started trading today with volume at 13,320 shares. The new Avantis Emerging Markets Value ETF and Avantis International Value ETF will begin trading on Thursday, Sept. 30.
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Re: New Avantis ETFs

Post by BetaTracker »

In a fairly recent paper ("Pursuing Multiple Premiums: Combination vs. Integration," Feb. 2021), DFA looks at investing in factors separately vs. taking an integrated approach. It finds that a fully integrated portfolio (with value, size and profitability applied in all cases), has the best results. This is not surprising considering it supports DFA's investment philosophy. If I'm reading it right, though, it also lists about 15% as the optimal (maybe optimal isn't the right word) allocation for small caps. I found that in Exhibit 3. Am I reading this right?
I found the paper for free through SSRN:
https://papers.ssrn.com/sol3/papers.cfm ... id=3793594
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Re: New Avantis ETFs

Post by Hallman »

tryingmybest wrote: Thu Sep 23, 2021 2:21 am Although the bottom line Avantis expense ratio is smaller, does effective cost ranking change after taking securities lending into account? Emerging Markets Small Cap Portfolio DEMSX currently has a net expense ratio of 0.60%:
https://us.dimensional.com/funds?filters=equity

In 2012 its securities lending profit was 0.35% (I don't know how to find figures for this year).
https://www.advisorperspectives.com/new ... _Funds.pdf

If we take these figures as current, then the effective ratio is 0.25%. DEMSX is one of the more expensive DFA funds.

How does Avantis compare?

Here is an earlier Bogleheads.org discussion on securities lending:
viewtopic.php?t=227579
Too early to tell. Securities lending usually picks up as funds mature. Avantis is rapidly gaining AUM which means securities lending as a % of net assets is lower than it will be in the future.

I looked through a few annual reports last year to look at securities lending revenue for a few Vanguard and Ishares funds. From what I could gather securities lending for developed markets, and particularly the US, was about half of what I saw 10 years ago. Not sure why, but lower interest rates and less interest in short selling as markets keep going up would be my guesses.
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Re: New Avantis ETFs

Post by One More Thing »

BetaTracker wrote: Thu Sep 23, 2021 10:55 am In a fairly recent paper ("Pursuing Multiple Premiums: Combination vs. Integration," Feb. 2021), DFA looks at investing in factors separately vs. taking an integrated approach. It finds that a fully integrated portfolio (with value, size and profitability applied in all cases), has the best results. This is not surprising considering it supports DFA's investment philosophy. If I'm reading it right, though, it also lists about 15% as the optimal (maybe optimal isn't the right word) allocation for small caps. I found that in Exhibit 3. Am I reading this right?
I found the paper for free through SSRN:
https://papers.ssrn.com/sol3/papers.cfm ... id=3793594
Now that's what I'm talking about. I asked about "optimal factor tilting" in another thread. Care to share that in the other thread?
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Re: New Avantis ETFs

Post by BetaTracker »

I copied this question and posed it in the thread "Is There an Optimal Factor Allocation?"
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One More Thing
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Re: New Avantis ETFs

Post by One More Thing »

BetaTracker wrote: Thu Sep 23, 2021 11:10 am I copied this question and posed it in the thread "Is There an Optimal Factor Allocation?"
Thank you.
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Re: New Avantis ETFs

Post by comeinvest »

gtwhitegold wrote: Wed Sep 22, 2021 11:17 pm
tarnation wrote: Wed Sep 22, 2021 10:56 pm
gtwhitegold wrote: Wed Sep 22, 2021 9:45 pm I'm curious how strong the factor loads will be on AVES. If it looks like they'll be pretty strong, then I'll probably move some of my EM allocation from FEMS to AVES. If not, then I'll just keep on waiting for a better EMV or EMSCV Fund.
FEMS does not look that great. 0.8% for 200 stocks. Not great Vol. and what with that spike in premium/ discount chart.
I feel like it's the cleanest dirty shirt as far as what I want in an EM fund. It's smaller and loads a good bit more on quality and momentum than DGS, but slightly less on value, but it positively loads on value, so overall it has better factor loads. I feel that it's worth the slightly higher ER over DGS since it's more aligned with what I want in a EM fund. I'm not too worried about the liquidity in the fund since I'm only adding to it at this time and I only make a couple of purchases each year. I obviously would like a better EMSC fund with positive factor loads, but I'm just using the tools available to make what I think is the best decision for me.
FEMS has turnover of > 100% every year. It underperformed EMGF and DGS over the last 5 years.
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Re: New Avantis ETFs

Post by comeinvest »

Is anybody concerned that AVEM has negative "quality" per Morningstar? https://www.morningstar.com/etfs/arcx/avem/portfolio

So does FNDE https://www.morningstar.com/etfs/arcx/fnde/portfolio
EMGF has positive quality: https://www.morningstar.com/etfs/bats/emgf/portfolio
DGS is neutral on quality - probably value controlled for quality? https://www.morningstar.com/etfs/arcx/dgs/portfolio
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typical.investor
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Re: New Avantis ETFs

Post by typical.investor »

comeinvest wrote: Thu Sep 23, 2021 5:39 pm Is anybody concerned that AVEM has negative "quality" per Morningstar? https://www.morningstar.com/etfs/arcx/avem/portfolio
Not really.
comeinvest wrote: Thu Sep 23, 2021 5:39 pm So does FNDE https://www.morningstar.com/etfs/arcx/fnde/portfolio
EMGF has positive quality: https://www.morningstar.com/etfs/bats/emgf/portfolio
DGS is neutral on quality - probably value controlled for quality? https://www.morningstar.com/etfs/arcx/dgs/portfolio
[Jan 2016 - Aug 2021] Life of EMGF

CAGR
FNDE 13.26%
DGS 12.32%
EMFG 10.96%

FNDE weights on sales, cash flow and dividends, so it's possible for inclusion based more heavily on good sales.

Anyway, the fundamental indexes have a more time varying exposure. You can see FNDE has the lowest quality exposure now than it's had in the last 5 years. MFEM (RAFI dynamic multi factor which weights on value, low volatility, quality, and momentum) does too. That suggests that EM quality is more in the expensive range for the factor.

[Oct 2017 - Aug 2021] Life of MFEM
MFEM 8.07%
FNDE 6.37%
EMFG 6.03%
Last edited by typical.investor on Thu Sep 23, 2021 8:14 pm, edited 1 time in total.
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brademac
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Re: New Avantis ETFs

Post by brademac »

Hallman wrote: Thu Sep 23, 2021 10:56 am
tryingmybest wrote: Thu Sep 23, 2021 2:21 am Although the bottom line Avantis expense ratio is smaller, does effective cost ranking change after taking securities lending into account? Emerging Markets Small Cap Portfolio DEMSX currently has a net expense ratio of 0.60%:
https://us.dimensional.com/funds?filters=equity

In 2012 its securities lending profit was 0.35% (I don't know how to find figures for this year).
https://www.advisorperspectives.com/new ... _Funds.pdf

If we take these figures as current, then the effective ratio is 0.25%. DEMSX is one of the more expensive DFA funds.

How does Avantis compare?

Here is an earlier Bogleheads.org discussion on securities lending:
viewtopic.php?t=227579
Too early to tell. Securities lending usually picks up as funds mature. Avantis is rapidly gaining AUM which means securities lending as a % of net assets is lower than it will be in the future.

I looked through a few annual reports last year to look at securities lending revenue for a few Vanguard and Ishares funds. From what I could gather securities lending for developed markets, and particularly the US, was about half of what I saw 10 years ago. Not sure why, but lower interest rates and less interest in short selling as markets keep going up would be my guesses.

When I emailed Avantis asking about securities lending income they told me they return 90% of it to the fund. The remaining 10% goes to State Street who does all the trading for them.
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Re: New Avantis ETFs

Post by comeinvest »

brademac wrote: Thu Sep 23, 2021 8:13 pm When I emailed Avantis asking about securities lending income they told me they return 90% of it to the fund. The remaining 10% goes to State Street who does all the trading for them.
When you say "all the trading for them" you mean all the trading in their portfolio, or all the trading with respect to securities lending only?
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brademac
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Re: New Avantis ETFs

Post by brademac »

comeinvest wrote: Thu Sep 23, 2021 8:27 pm
brademac wrote: Thu Sep 23, 2021 8:13 pm When I emailed Avantis asking about securities lending income they told me they return 90% of it to the fund. The remaining 10% goes to State Street who does all the trading for them.
When you say "all the trading for them" you mean all the trading in their portfolio, or all the trading with respect to securities lending only?

They didn’t say. I wondered same thing. I don’t know if American Century has the infrastructure/trading desk to handle Avantis as it keeps getting larger and larger by the day. AVUV is now a “main line” ETF with lots of volume.
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Re: New Avantis ETFs

Post by gtwhitegold »

comeinvest wrote: Thu Sep 23, 2021 2:12 pm
gtwhitegold wrote: Wed Sep 22, 2021 11:17 pm
tarnation wrote: Wed Sep 22, 2021 10:56 pm
gtwhitegold wrote: Wed Sep 22, 2021 9:45 pm I'm curious how strong the factor loads will be on AVES. If it looks like they'll be pretty strong, then I'll probably move some of my EM allocation from FEMS to AVES. If not, then I'll just keep on waiting for a better EMV or EMSCV Fund.
FEMS does not look that great. 0.8% for 200 stocks. Not great Vol. and what with that spike in premium/ discount chart.
I feel like it's the cleanest dirty shirt as far as what I want in an EM fund. It's smaller and loads a good bit more on quality and momentum than DGS, but slightly less on value, but it positively loads on value, so overall it has better factor loads. I feel that it's worth the slightly higher ER over DGS since it's more aligned with what I want in a EM fund. I'm not too worried about the liquidity in the fund since I'm only adding to it at this time and I only make a couple of purchases each year. I obviously would like a better EMSC fund with positive factor loads, but I'm just using the tools available to make what I think is the best decision for me.
FEMS has turnover of > 100% every year. It underperformed EMGF and DGS over the last 5 years.
Where do you get that? I just did a pull on Morningstar and it has FEMS ahead of EMGF, DGS, and VWO. I'm not saying that it's beating everything by a large margin, but it is ahead. It's definitely a high risk / high reward type of investment with greater peaks and greater drawdowns compared to other EM funds which are already more volatile than US or Developed International funds. That should make it a good rebalancing parter and with the greater factor loads overall, should provide higher returns over the long term.

Image
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Re: New Avantis ETFs

Post by comeinvest »

gtwhitegold wrote: Thu Sep 23, 2021 11:43 pm
comeinvest wrote: Thu Sep 23, 2021 2:12 pm
FEMS has turnover of > 100% every year. It underperformed EMGF and DGS over the last 5 years.
Where do you get that? I just did a pull on Morningstar and it has FEMS ahead of EMGF, DGS, and VWO. I'm not saying that it's beating everything by a large margin, but it is ahead. It's definitely a high risk / high reward type of investment with greater peaks and greater drawdowns compared to other EM funds which are already more volatile than US or Developed International funds. That should make it a good rebalancing parter and with the greater factor loads overall, should provide higher returns over the long term.

Image
Sorry I was lazy and just looked at Google Finance price performance. FEMS must have had higher dividends than the others. Anyways, I think the available time frames of about 5 years are not meaningful at all for performance comparisons. The relative performance of strategies fluctuates a lot. What I do now is that FEMS had >100% turnover every year that I checked, which I do know drags down performance. Whether the high turnover strategy results in higher returns after making up for transaction costs, is something I do NOT know, but I am suspicious.
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Re: New Avantis ETFs

Post by comeinvest »

brademac wrote: Thu Sep 23, 2021 9:08 pm
comeinvest wrote: Thu Sep 23, 2021 8:27 pm
brademac wrote: Thu Sep 23, 2021 8:13 pm When I emailed Avantis asking about securities lending income they told me they return 90% of it to the fund. The remaining 10% goes to State Street who does all the trading for them.
When you say "all the trading for them" you mean all the trading in their portfolio, or all the trading with respect to securities lending only?

They didn’t say. I wondered same thing. I don’t know if American Century has the infrastructure/trading desk to handle Avantis as it keeps getting larger and larger by the day. AVUV is now a “main line” ETF with lots of volume.
I thought the trading desk and their proprietary methods of executing orders ("patient trading") were integral to the success of the strategies of DFA and Avantis, as the theoretical outperformance of the factor strategies need to outweigh the associated implementation cost. I actually thought that was a key distinguishing feature of DFA and now Avantis. Now if they have a competitor do "all the trading" for them...
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Re: New Avantis ETFs

Post by FiveFactor »

comeinvest wrote: Fri Sep 24, 2021 2:52 am
brademac wrote: Thu Sep 23, 2021 9:08 pm
comeinvest wrote: Thu Sep 23, 2021 8:27 pm
brademac wrote: Thu Sep 23, 2021 8:13 pm When I emailed Avantis asking about securities lending income they told me they return 90% of it to the fund. The remaining 10% goes to State Street who does all the trading for them.
When you say "all the trading for them" you mean all the trading in their portfolio, or all the trading with respect to securities lending only?

They didn’t say. I wondered same thing. I don’t know if American Century has the infrastructure/trading desk to handle Avantis as it keeps getting larger and larger by the day. AVUV is now a “main line” ETF with lots of volume.
I thought the trading desk and their proprietary methods of executing orders ("patient trading") were integral to the success of the strategies of DFA and Avantis, as the theoretical outperformance of the factor strategies need to outweigh the associated implementation cost. I actually thought that was a key distinguishing feature of DFA and now Avantis. Now if they have a competitor do "all the trading" for them...
That’s not how capital markets are structured. SS would be the Prime Broker here.
Small/Value/Profitability: | 30% AVUV | 30% AVDV | 30% AVES | Momentum: | 5% QMOM | 5% IMOM | Volatility: | 0.1% PUTW | Term: | 0.1% BND
HurrDurrImaPilot
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Re: New Avantis ETFs

Post by HurrDurrImaPilot »

Anyone know if this is still on track for the 30th? Not very familiar with first day trading dynamics on ETFs so wondering if there are any considerations on avoiding until it settles out a bit.
comeinvest
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Re: New Avantis ETFs

Post by comeinvest »

HurrDurrImaPilot wrote: Fri Sep 24, 2021 1:34 pm Anyone know if this is still on track for the 30th? Not very familiar with first day trading dynamics on ETFs so wondering if there are any considerations on avoiding until it settles out a bit.
Good question. Looks like many Bogleheads are having their hands on the trigger to shift their portfolios to AVES, waiting for the 30th to approach. Will there be any sellers? Maybe watch the discount/premium?

Will the new fund already have an existing portfolio on the first day, or are they buying it on and after inception?
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typical.investor
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Re: New Avantis ETFs

Post by typical.investor »

comeinvest wrote: Fri Sep 24, 2021 6:13 pm
HurrDurrImaPilot wrote: Fri Sep 24, 2021 1:34 pm Anyone know if this is still on track for the 30th? Not very familiar with first day trading dynamics on ETFs so wondering if there are any considerations on avoiding until it settles out a bit.
Good question. Looks like many Bogleheads are having their hands on the trigger to shift their portfolios to AVES, waiting for the 30th to approach. Will there be any sellers? Maybe watch the discount/premium?
I purchased iMTM (iShares Intl Momentum) when it was just released. What I noticed is there was a lack of info about it at the places I usually looked like Morningstar. Honestly it did look like the fund was even trading. It looked an AP was simply buying at what seemed to be NAV. (not sure though that things always work out this way for new ETFs - this is only one experience).

That said, I am going to keep the fundamental indexes I have already as I dislike changing exposure. Seems not that different unless AVES is pretty small.
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Re: New Avantis ETFs

Post by asset_chaos »

comeinvest wrote: Fri Sep 24, 2021 6:13 pm
HurrDurrImaPilot wrote: Fri Sep 24, 2021 1:34 pm Anyone know if this is still on track for the 30th? Not very familiar with first day trading dynamics on ETFs so wondering if there are any considerations on avoiding until it settles out a bit.
Good question. Looks like many Bogleheads are having their hands on the trigger to shift their portfolios to AVES, waiting for the 30th to approach. Will there be any sellers? Maybe watch the discount/premium?

Will the new fund already have an existing portfolio on the first day, or are they buying it on and after inception?
Not in the business, so don't know precisely, but my guess is that American Century seeds the fund with some number of millions of dollars that they place with the authorized market makers who use the seed money to buy a few creation baskets worth of company stocks that go into the fund in exchange for shares of the ETF. Then the authorized market makers have an inventory of ETF shares ready to sell to initial buyers of the ETF in the open market. Only a guess, but, except for seed money coming from the ETF sponsor, that's more or less how the normal creation mechanism for ETFs works.

My plan is to wait a quarter to let any start up trading issues abate and to see what the portfolio characteristics are. Then if the factor characteristics look ok, I'll start to move gradually from DGS to AVES. I try to never be in a hurry to trade.
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sunnywindy
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Re: New Avantis ETFs

Post by sunnywindy »

To my surprise, the 5-day old Avantis US Large-Cap Value ETF (AVLV) has only a little over $1 Million in AUM. Traditionally, fund companies seeded their ETFs with between $2 and $3 million (just my observation) and in recent years, it seems they have gone higher (my observation, again). I think fund companies worry the ETF 'Terrordome' will punish any ETF that starts off with low AUM with permanent low AUM. My guess is that Avantis is very confident AVLV will gain substantial AUM in the next year no matter how little money they seed the fund with. My next guess is that the ETFs that come out in a few days will have similarly low initial AUM.
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Re: New Avantis ETFs

Post by nedsaid »

asset_chaos wrote: Fri Sep 24, 2021 7:28 pm
comeinvest wrote: Fri Sep 24, 2021 6:13 pm
HurrDurrImaPilot wrote: Fri Sep 24, 2021 1:34 pm Anyone know if this is still on track for the 30th? Not very familiar with first day trading dynamics on ETFs so wondering if there are any considerations on avoiding until it settles out a bit.
Good question. Looks like many Bogleheads are having their hands on the trigger to shift their portfolios to AVES, waiting for the 30th to approach. Will there be any sellers? Maybe watch the discount/premium?

Will the new fund already have an existing portfolio on the first day, or are they buying it on and after inception?
Not in the business, so don't know precisely, but my guess is that American Century seeds the fund with some number of millions of dollars that they place with the authorized market makers who use the seed money to buy a few creation baskets worth of company stocks that go into the fund in exchange for shares of the ETF. Then the authorized market makers have an inventory of ETF shares ready to sell to initial buyers of the ETF in the open market. Only a guess, but, except for seed money coming from the ETF sponsor, that's more or less how the normal creation mechanism for ETFs works.

My plan is to wait a quarter to let any start up trading issues abate and to see what the portfolio characteristics are. Then if the factor characteristics look ok, I'll start to move gradually from DGS to AVES. I try to never be in a hurry to trade.
Keep in mind that American Century has its own ETFs in addition to those offered by its Avantis subsidiary. I do check the Assets Under Management for the various American Century ETFs and they are bringing in money, not like Avantis which has been a resounding success but still drawing in enough monies that the American Century ETFs are viable. A couple of things I am aware of that they are doing are starting up Blended Target Date Funds that mix Avantis ETFs with the more traditional American Century Mutual funds. They also have a Private Client Group that now has drawn almost 1.3 Billion in Assets (similar to Vanguard Personal Advisory Service) and Private Client Group customers have American Century ETFs in their portfolios. I am told that Private Client Group will start including Avantis ETFs in their portfolios but I haven't seen that yet in my own account.

So American Century is sort of competing with itself in the ETF arena and yet cooperating at the same time. For example, both American Century and Avantis offer a U.S. Value ETF and a Municipal Bond ETF, so you see the competition. Both Avantis is a subsidiary company and uses the American Century Infrastructure, here you see the cooperation. I am watching to see how this develops, American Century operates more Index based ETFs and Active ETFs, Avantis is running so-called factor funds which are sort of active but has hired talent from PIMCO to operate fixed income funds.
So you are seeing a bit of overlap here but each provider also is filling in certain niches.

American Century as a company can see the ETF trend, you can now have a 100% ETF portfolio at American Century/Avantis and skip the mutual funds entirely. What you will see is active management at a much lower price, I think you will see it offered at 20 basis points through the ETF platform. Not there yet, but you can see where this all is headed. I don't think the traditional mutual fund industry is going away but all the future growth in Assets Under Management will be in the ETF space, the mutual fund industry will see a very slow decline.

It appears that all of the recordkeeping for individual mutual fund accounts costs 9-12 basis points a year. Let the brokerage firms keep track of who owns what rather than having the asset management firms hire accountants and clerical people. This is why Vanguard is gradually offloading its clients to a brokerage platform and giving its clients an option to convert mutual funds to ETFs, not sure who they use as their brokerage platform.
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Re: New Avantis ETFs

Post by Apathizer »

BetaTracker wrote: Thu Sep 23, 2021 10:55 am In a fairly recent paper ("Pursuing Multiple Premiums: Combination vs. Integration," Feb. 2021), DFA looks at investing in factors separately vs. taking an integrated approach. It finds that a fully integrated portfolio (with value, size and profitability applied in all cases), has the best results. This is not surprising considering it supports DFA's investment philosophy. If I'm reading it right, though, it also lists about 15% as the optimal (maybe optimal isn't the right word) allocation for small caps. I found that in Exhibit 3. Am I reading this right?
I found the paper for free through SSRN:
https://papers.ssrn.com/sol3/papers.cfm ... id=3793594
This makes sense. I used to be a diehard pure index investor, but have been moving money into AVUS, AVDE, and AVEM. I thought just supplementing my index funds with AVUV and AVDV, but also want to value exposure to emerging markets. The level of small cap allocation in the paper is consistent with what I've read elsewhere.

AVUS and AVDE do seem to have to be about 15% small and micro cap, while AVEM is about 10%. I think optimal is as good a term as any. I'm guessing this level of allocation is expected to provide the highest risk-adjusted return, meaning it's expected to have both higher returns and lower volatility than the total market.

It's also important to note that removing expensive low-profit growth stocks doesn't mean removing all growth stocks, esp large cap. Many growth stocks, particularly large-cap, are also highly profitable, which is why I'm guessing Avantis still holds some of them.
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Re: New Avantis ETFs

Post by thenextguy »

Anyone buying AVLV? They have some interesting picks for value compared to other funds.
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Re: New Avantis ETFs

Post by DanLeeRot »

Once AUM for AVLV hits 30 million, I plan to slowly shift money from Vanguard Value VTV to Avantis Large Cap Value AVLV.
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Re: New Avantis ETFs

Post by tarnation »

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Re: New Avantis ETFs

Post by Bearlurker »

Looks like AVES started trading today.
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Re: New Avantis ETFs

Post by tarnation »

How long will it be before we get some info on holdings, market cap, P/B etc. I bought a little just for a placeholder.
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Re: New Avantis ETFs

Post by absolute zero »

tarnation wrote: Thu Sep 30, 2021 1:50 pm How long will it be before we get some info on holdings, market cap, P/B etc. I bought a little just for a placeholder.
Maybe next week? I don't know. But AVLV IPO'd a week ago, and it's data is mostly empty on ETF.com but it does have data available on M*. So I'll probably check morningstar for AVES sometime next week.
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Re: New Avantis ETFs

Post by Bearlurker »

tarnation wrote: Thu Sep 30, 2021 1:50 pm How long will it be before we get some info on holdings, market cap, P/B etc. I bought a little just for a placeholder.
I'm not sure. I bought some too.
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Re: New Avantis ETFs

Post by asset_chaos »

At avantisinvestors.com they have a page now for aves. They seeded the fund with $4 million and have 80,000 shares outstanding. The holdings under portfolio is fully populated. At the top 10 holdings under portfolio tab there is a small button view all holdings. There look to be about 500 stocks in the fund. Clearly they are in a start up phase because at 19% the largest holding is labeled MSCI EmgMkt Dec21, which I will guess is a futures contract.
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Re: New Avantis ETFs

Post by Apathizer »

tarnation wrote: Thu Sep 30, 2021 1:50 pm How long will it be before we get some info on holdings, market cap, P/B etc. I bought a little just for a placeholder.
I'm really curious as well. Looking over the holdings I don't recognize any of them, so I'm guessing it's more small/mid cap focused than AVEM which is all cap.
Last edited by Apathizer on Thu Sep 30, 2021 7:13 pm, edited 2 times in total.
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Re: New Avantis ETFs

Post by tarnation »

Apathizer wrote: Thu Sep 30, 2021 7:07 pm
tarnation wrote: Thu Sep 30, 2021 1:50 pm How long will it be before we get some info on holdings, market cap, P/B etc. I bought a little just for a placeholder.
I'm really curious as well. I wonder how it differs from AVEM, which seems to be all-cap value. I'm guessing AVES will be more small-cap focused.
I guess we'll see.
Not so sure that it isn’t all cap em value. Considering Swedroes recent post. https://twitter.com/larryswedroe/status ... 36704?s=21
Edit: he says non large so maybe just mid small?
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Re: New Avantis ETFs

Post by comeinvest »

tarnation wrote: Thu Sep 30, 2021 7:09 pm
Apathizer wrote: Thu Sep 30, 2021 7:07 pm
tarnation wrote: Thu Sep 30, 2021 1:50 pm How long will it be before we get some info on holdings, market cap, P/B etc. I bought a little just for a placeholder.
I'm really curious as well. I wonder how it differs from AVEM, which seems to be all-cap value. I'm guessing AVES will be more small-cap focused.
I guess we'll see.
Not so sure that it isn’t all cap em value. Considering Swedroes recent post. https://twitter.com/larryswedroe/status ... 36704?s=21
Edit: he says non large so maybe just mid small?
It seems that we are scratching our heads, and trying to reverse-engineer, what the objective/tilt of this fund is. Why is it so difficult for American Century to offer even a simple, concise description of what this fund does and how it differentiates itself from AVEM ?!

EDIT: They provide a description, https://corporate.americancentury.com/c ... -etfs.html
but it is not specific about the size factor.
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Re: New Avantis ETFs

Post by YRT70 »

The futures contract is for South Korea holdings, which they apparently hadn't bought yet.

Given the very early stage the ETF is in I would give it some time before buying.
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Re: New Avantis ETFs

Post by Apathizer »

tarnation wrote: Thu Sep 30, 2021 7:09 pm Not so sure that it isn’t all cap em value. Considering Swedroes recent post. https://twitter.com/larryswedroe/status ... 36704?s=21
Edit: he says non large so maybe just mid small?
We'll see, but that seems consistent with their approach since AVUV is almost entirely US small cap value and AVDV is developed ex-US small and mid-cap value.

Rather than bother with AVUV and AVDV I've opted for AVUS, AVDE, and AVEM as index replacements. As I wrote earlier, the factor tilt degree seems designed to both increase expected returns and minimize volatility, and they also apply screens to equities of all sizes. This seems simpler than holding both total market index and small-cap value funds.

AVEM small-cap value tilt seems fairly modest, but maybe that segment is a smaller overall market share in emerging markets than in the US.
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Re: New Avantis ETFs

Post by Nathan Drake »

Apathizer wrote: Fri Oct 01, 2021 9:15 am
tarnation wrote: Thu Sep 30, 2021 7:09 pm Not so sure that it isn’t all cap em value. Considering Swedroes recent post. https://twitter.com/larryswedroe/status ... 36704?s=21
Edit: he says non large so maybe just mid small?
We'll see, but that seems consistent with their approach since AVUV is almost entirely US small cap value and AVDV is developed ex-US small and mid-cap value.

Rather than bother with AVUV and AVDV I've opted for AVUS, AVDE, and AVEM as index replacements. As I wrote earlier, the factor tilt degree seems designed to both increase expected returns and minimize volatility, and they also apply screens to equities of all sizes. This seems simpler than holding both total market index and small-cap value funds.

AVEM small-cap value tilt seems fairly modest, but maybe that segment is a smaller overall market share in emerging markets than in the US.
If you are just going large cap you might as well invest in index funds at vanguard for lower ER

The main advantage of Avantis funds is to capture deep size/value exposure
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
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Re: New Avantis ETFs

Post by Apathizer »

Nathan Drake wrote: Fri Oct 01, 2021 9:39 am If you are just going large cap you might as well invest in index funds at vanguard for lower ER

The main advantage of Avantis funds is to capture deep size/value exposure
It depends how much of a tilt you want. If you want a stronger small cap tilt, that makes sense. But if you compare the Avantis total market funds (AVUS, AVDE, AVEM) with comparable Vanguard funds, Avantis average market cap is about half of Vanguard.

And as I said I think Avantis applies their screens to all capitalizations of AVUS, AVDE, and AVEM, so even larger cap stocks with lower expected returns are under-weighted or maybe even eliminated entirely. I think Avantis designed this funds for a balance higher return and lower volatility. Too much of a small-cap value lean reduces risk-adjusted returns, which is undesirable for those of us who are getting older.
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Re: New Avantis ETFs

Post by Nathan Drake »

Apathizer wrote: Fri Oct 01, 2021 12:44 pm
Nathan Drake wrote: Fri Oct 01, 2021 9:39 am If you are just going large cap you might as well invest in index funds at vanguard for lower ER

The main advantage of Avantis funds is to capture deep size/value exposure
It depends how much of a tilt you want. If you want a stronger small cap tilt, that makes sense. But if you compare the Avantis total market funds (AVUS, AVDE, AVEM) with comparable Vanguard funds, Avantis average market cap is about half of Vanguard.

And as I said I think Avantis applies their screens to all capitalizations of AVUS, AVDE, and AVEM, so even larger cap stocks with lower expected returns are under-weighted or maybe even eliminated entirely. I think Avantis designed this funds for a balance higher return and lower volatility. Too much of a small-cap value lean reduces risk-adjusted returns, which is undesirable for those of us who are getting older.
Fair enough. In a value dominated market AVUS will outperform VTSAX.

Still think it’s worth adding a small position in SCV and maybe increasing bond exposure
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