Trending
Ask any advisor, particularly those that are adopters/fans of exchange traded funds, and chances are they can name a fair amount of the 10 largest ETF issuers.
Certainly, they’d easily be able to name the “big three” of BlackRock/iShares, Vanguard and State Street/SPDR as well as some others. Probably Invesco and Schwab, among others. Plenty of advisors are also likely to be name several ETF issuers, particularly those that are also well-known mutual fund sponsors. Point is the ETF industry is like any other in that it’s easy to recognize the biggest brands, but there occasions when that heft and recognition obfuscate the success of some upstarts.
Take the case of Avantis. A unit of American Century, Avantis was formed in 2019. As of July 30, Avantis had $46.6 billion in ETF assets under management, making it 14th-largest by that metric. That’s stellar progress for a firm that’s been in the game just five years. That also confirms advisors have been swift to embrace Avantis ETFs.
Inside the Avantis Ascent
Avantis was formed by some Dimensional Fund Advisors (DFA) alumni, indicating pedigree has helped the firm rise the ranks. That’s also an indication of advisor adoption.
“It was founded by former employees of the $539 billion fund shop Dimensional Fund Advisors, including Eduardo Repetto, who had served as co-CEO and co-CIO at Dimensional, and Pat Keating, who had served as COO,” notes Gabe Alpert of Morningstar.
Avantis deploys some of the same methodologies and strategies as does DFA and the ongoing ascent of actively managed ETFs has helped the former become a rising start in the ETF arena.
“The focus on active ETFs has come at the right time. Eight of the last nine years saw outflows from actively managed mutual funds and flows into active ETFs,” adds Alpert. “This trend has accelerated, with $1.6 trillion flowing out of active mutual funds over 2022 and 2023. As of the end of June, active mutual funds (excluding money market funds) had a total of $13.3 trillion in assets.”
Favorable Fees Helping Avantis, Too
Another catalyst for Avantis has been the issuer’s ability to navigate the low fund fee landscape – something that’s been challenging for some active managers. The average annual expense ratio of five of the largest Avantis ETFs highlighted by Morningstar is just 0.264% -- even more impressive when considering three are international equity funds.
Avantis’s ability to keep a lid on fees is likely a source of allure for advisors and investors. It’s a positive for the issuer because market participants love affordable fund fees and that is unlikely to change.
“As of March of this year, the cheapest quintile of active ETFs holds $325 billion in assets, while the most expensive quintile holds just $35 billion. Avantis’ funds have an average expense ratio of 21 basis points, far less than the 69-point average for active ETFs as a whole,” concludes Alpert.