New Avantis worldwide ETF with value tilt

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brademac
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New Avantis worldwide ETF with value tilt

Post by brademac »

Saw this on Twitter.

Avantis files for active ETF: holds 10 of its own ETFs

Avantis All Equity Markets ETF
$AVGE | fees to be determined | eff Sep 21


$AVUS. US equity
$AVSC. Small cap (and micro cap)
$AVLV Large Value
$AVUV Small Value

$AVDE Developed Markets
$AVIV Developed Markets Value
$AVDV Developed Markets Small Value

$AVEM Emerging Markets
$AVES Emerging Markets Value

$AVRE Real Estate


Thoughts on this for one stop single fund holding for portfolio assuming the ER is low?
UpperNwGuy
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Re: New Avantis worldwide ETF with value tilt

Post by UpperNwGuy »

Seems overly complicated. I'm guessing that you could construct a fund with the same returns with fewer constituent ETFs.
quietseas
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Re: New Avantis worldwide ETF with value tilt

Post by quietseas »

No for me, but if I did it would be tax advantaged only, definitely not taxable.
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Re: New Avantis worldwide ETF with value tilt

Post by lassevirensghost »

:sharebeer sounds great
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Nathan Drake
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Re: New Avantis worldwide ETF with value tilt

Post by Nathan Drake »

UpperNwGuy wrote: Tue Jun 28, 2022 8:41 pm Seems overly complicated. I'm guessing that you could construct a fund with the same returns with fewer constituent ETFs.
That's the whole point of this single ETF. You get global factor exposure and don't even need to think about rebalancing your equity position.

If you're someone that doesn't like to allocate to 5 or more funds, believes in having a mild Value tilt, with a mild US bias, then this is the fund for you.

I suspect that a lot of people would prefer to more strongly tilt to Value or reduce the US bias....However, if you are wanting a VT replacement that's Value oriented with a slight US tilt this is a great fund.
20% VOO | 20% VXUS | 20% AVUV | 20% AVDV | 20% AVES
saolafan
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Re: New Avantis worldwide ETF with value tilt

Post by saolafan »

I like the idea of "Vanguard Total World Stock but with Avantis flair", but similar to what Nathan Drake said, I'd imagine that investors who want a value tilt wouldn't want to be stuck with whatever Avantis feels like doing. I wonder if the mutual fund version will end up being the best option in someone's 401k plan in a few years.
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Re: New Avantis worldwide ETF with value tilt

Post by Boilermaker82 »

I’m a big fan of Avantis and believe in a mild value tilt (I’m currently in US/Intl indexes plus some AVUV for SV tilt).

I wouldn’t change what I already have, but I’d consider throwing some money at this in a new position and see how it does over time. This kind of ETF has been overdue for them.
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matjen
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Re: New Avantis worldwide ETF with value tilt

Post by matjen »

Bogleheads, you are welcome. :D

viewtopic.php?p=6507186#p6507186

"Moreover, why not just offer a global ETF like Vanguard's VT but give it a nice SCV tilt?

I'm assuming the answer is that an all-in-one would make an Advisor less "useful" and that means only DIY folks would use it. Since Avantis is less tied to Advisors I am hoping they make the leap."
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asset_chaos
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Re: New Avantis worldwide ETF with value tilt

Post by asset_chaos »

The ER (to be determined) for Avantis All Equity Markets (AVGE) would need to be zero; otherwise, I don't see how this works. The underlying funds all have their ERs. If the wrapper fund has an additional layer of fees, that would make the fund of funds unattractive.
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pascalwager
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Re: New Avantis worldwide ETF with value tilt

Post by pascalwager »

matjen wrote: Wed Jun 29, 2022 5:06 pm Bogleheads, you are welcome. :D

viewtopic.php?p=6507186#p6507186

"Moreover, why not just offer a global ETF like Vanguard's VT but give it a nice SCV tilt?

I'm assuming the answer is that an all-in-one would make an Advisor less "useful" and that means only DIY folks would use it. Since Avantis is less tied to Advisors I am hoping they make the leap."
Do they even have an advisor requirement? I bought AVDV at Schwab without having an advisor.
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arcticpineapplecorp.
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Re: New Avantis worldwide ETF with value tilt

Post by arcticpineapplecorp. »

asset_chaos wrote: Wed Jun 29, 2022 8:50 pm The ER (to be determined) for Avantis All Equity Markets (AVGE) would need to be zero; otherwise, I don't see how this works. The underlying funds all have their ERs. If the wrapper fund has an additional layer of fees, that would make the fund of funds unattractive.
i'm assuming you don't mean the e.r. should be $0 but rather it should have $0 ADDITIONAL fees with regards to what the individual funds cost.

However, doesn't the combo of vti at 0.03% and vxus at 0.07% at their weights, say 60% and 40%, respectively cost (if hold as two fund portfolio):
(.03% X 60%) + (.07% X 40%)
0.018% + 0.028% =

0.046% total (or 4.6 bps)

vs

0.07% or 7 bps for VT?

how is that any different in that an all world fund with vanguard IS slightly more expensive than the sum of the weighted expenses of the individual components?
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quietseas
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Re: New Avantis worldwide ETF with value tilt

Post by quietseas »

Any thoughts on why this is an "ETF of ETFs" not a single portfolio which would give them potentially more efficient tax management especially since it is equity only no bonds? It almost seems like a partial effort.
gtwhitegold
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Re: New Avantis worldwide ETF with value tilt

Post by gtwhitegold »

arcticpineapplecorp. wrote: Wed Jun 29, 2022 9:05 pm
asset_chaos wrote: Wed Jun 29, 2022 8:50 pm The ER (to be determined) for Avantis All Equity Markets (AVGE) would need to be zero; otherwise, I don't see how this works. The underlying funds all have their ERs. If the wrapper fund has an additional layer of fees, that would make the fund of funds unattractive.
i'm assuming you don't mean the e.r. should be $0 but rather it should have $0 ADDITIONAL fees with regards to what the individual funds cost.

However, doesn't the combo of vti at 0.03% and vxus at 0.07% at their weights, say 60% and 40%, respectively cost (if hold as two fund portfolio):
(.03% X 60%) + (.07% X 40%)
0.018% + 0.028% =

0.046% total (or 4.6 bps)

vs

0.07% or 7 bps for VT?

how is that any different in that an all world fund with vanguard IS slightly more expensive than the sum of the weighted expenses of the individual components?
I do agree that a fund of funds should have minimal if any additional costs, but regarding VT, it isn't a fund of funds. It's distinct from VTI and VXUS and is priced based upon the total assets of the fund and actual costs like any other Vanguard fund.
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matjen
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Re: New Avantis worldwide ETF with value tilt

Post by matjen »

pascalwager wrote: Wed Jun 29, 2022 9:00 pm
Do they even have an advisor requirement? I bought AVDV at Schwab without having an advisor.
No they do not. My take was more that many advisors that aren't DFA will put together portfolios for their clients and rebalance, etc. as part of their services. Potentially, a fund like this would really simplify almost all of that other than the fixed income part.
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muffins14
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Re: New Avantis worldwide ETF with value tilt

Post by muffins14 »

It seems kind of silly to me

1) why real estate?
2) I imagine a portfolio that mixes AVUV and VTI plus AVDV and VXUS in some ratio (like my own) can have identical factor loads as their new ETF, but at a lower cost
35% VTI, 25% AVUV, 15% IXUS, 15% AVDV, 10% VWO
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zeke1975
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Re: New Avantis worldwide ETF with value tilt

Post by zeke1975 »

They add the real estate, because Avantis, like DFA doesn’t include REITS in their other etfs. So if they want to approximate the global mkt with a value tilt, they need to add in the REIT etf.
Apathizer
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Re: New Avantis worldwide ETF with value tilt

Post by Apathizer »

I haven't found confirmation of this, but assuming it's true it seems like a good idea. However, I already hold AVUS and recently sold AVDE and AVEM in favor of DFAX for simplicity. At this point I'm tired of tinkering with my portfolio, and 3 funds is simple enough for me, so I'll let it be for now.
ROTH: 40% AVUS, 30% DFAX, 30% BNDW. Taxable: 50% BNDW, 30% AVUS, 20% DFAX.
Booogle
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Re: New Avantis worldwide ETF with value tilt

Post by Booogle »

quietseas wrote: Tue Jun 28, 2022 8:44 pm No for me, but if I did it would be tax advantaged only, definitely not taxable.
Why is that?

Fund-of-funds are very tax efficient.

Distributions will be held inside the ETF as cash instead of being spit out.
sycamore
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Re: New Avantis worldwide ETF with value tilt

Post by sycamore »

Here's the SEC filing: https://www.sec.gov/Archives/edgar/data ... -index.htm.

There are actually three ETFs mentioned:
- Avantis Inflation Focused Equity ETF
- Avantis All Equity Markets ETF
- American Century Short Duration Strategic Income ETF

The prospectuses are in another file: https://www.sec.gov/Archives/edgar/data ... 22485a.htm.

For the All Equity Markets ETF, under "Principal Investment Strategies" I see:
Principal Investment Strategies
Avantis All Equity Markets ETF is a “fund of funds,” meaning that it seeks to achieve its objective by investing in other Avantis exchange-traded funds (ETFs) (collectively, the underlying funds). The underlying funds represent a broadly diversified basket of equity securities that seek to overweight securities the underlying funds expect 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.

Code: Select all

					Target Weight	Target Range
US Equity				70%		63% to 77%
US Equity ETF, US Small Cap Equity ETF, US Large Cap Value ETF, US Small Cap Value ETF

Non-U.S. Developed Markets		17%		10% to 24%
International Equity ETF, International Large Cap Value ETF, International Small Cap Value ETF

Emerging Markets			10%	3% to 17%
Emerging Markets Equity ETF, Emerging Markets Value ETF

Sector Equity				3%	1% to 6%
Avantis Real Estate ETF
Apathizer
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Re: New Avantis worldwide ETF with value tilt

Post by Apathizer »

sycamore wrote: Thu Jun 30, 2022 8:08 am Here's the SEC filing: https://www.sec.gov/Archives/edgar/data ... -index.htm.

There are actually three ETFs mentioned:
- Avantis Inflation Focused Equity ETF
- Avantis All Equity Markets ETF
- American Century Short Duration Strategic Income ETF

The prospectuses are in another file: https://www.sec.gov/Archives/edgar/data ... 22485a.htm.

For the All Equity Markets ETF, under "Principal Investment Strategies" I see:
Principal Investment Strategies
Avantis All Equity Markets ETF is a “fund of funds,” meaning that it seeks to achieve its objective by investing in other Avantis exchange-traded funds (ETFs) (collectively, the underlying funds). The underlying funds represent a broadly diversified basket of equity securities that seek to overweight securities the underlying funds expect 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.

Code: Select all

					Target Weight	Target Range
US Equity				70%		63% to 77%
US Equity ETF, US Small Cap Equity ETF, US Large Cap Value ETF, US Small Cap Value ETF

Non-U.S. Developed Markets		17%		10% to 24%
International Equity ETF, International Large Cap Value ETF, International Small Cap Value ETF

Emerging Markets			10%	3% to 17%
Emerging Markets Equity ETF, Emerging Markets Value ETF

Sector Equity				3%	1% to 6%
Avantis Real Estate ETF
It definitely seems like they're basically emulating DFA global equity. Again, if I weren't so burned out on tinkering with my portfolio and were just starting out I'd probably use this as my sole equity fund, but I'm content with my equity portfolio as is for now.
ROTH: 40% AVUS, 30% DFAX, 30% BNDW. Taxable: 50% BNDW, 30% AVUS, 20% DFAX.
Apathizer
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Re: New Avantis worldwide ETF with value tilt

Post by Apathizer »

quietseas wrote: Wed Jun 29, 2022 9:15 pm Any thoughts on why this is an "ETF of ETFs" not a single portfolio which would give them potentially more efficient tax management especially since it is equity only no bonds? It almost seems like a partial effort.
After reading the prospectus in a little more detail I have similar concerns. I'm less concerned about tax efficiency and more concerned that it might be overly active.

10 fun seems like quite a bit to juggle, so it could be fairly active. I know it's not traditional stock picking but rather asset class picking, but it seems like that would still entail more risk than a lower turnover strategy.
Last edited by Apathizer on Sat Jul 02, 2022 1:13 pm, edited 1 time in total.
ROTH: 40% AVUS, 30% DFAX, 30% BNDW. Taxable: 50% BNDW, 30% AVUS, 20% DFAX.
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drumboy256
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Re: New Avantis worldwide ETF with value tilt

Post by drumboy256 »

Apathizer wrote: Thu Jun 30, 2022 3:26 pm
sycamore wrote: Thu Jun 30, 2022 8:08 am Here's the SEC filing: https://www.sec.gov/Archives/edgar/data ... -index.htm.

There are actually three ETFs mentioned:
- Avantis Inflation Focused Equity ETF
- Avantis All Equity Markets ETF
- American Century Short Duration Strategic Income ETF

The prospectuses are in another file: https://www.sec.gov/Archives/edgar/data ... 22485a.htm.

For the All Equity Markets ETF, under "Principal Investment Strategies" I see:
Principal Investment Strategies
Avantis All Equity Markets ETF is a “fund of funds,” meaning that it seeks to achieve its objective by investing in other Avantis exchange-traded funds (ETFs) (collectively, the underlying funds). The underlying funds represent a broadly diversified basket of equity securities that seek to overweight securities the underlying funds expect 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.

Code: Select all

					Target Weight	Target Range
US Equity				70%		63% to 77%
US Equity ETF, US Small Cap Equity ETF, US Large Cap Value ETF, US Small Cap Value ETF

Non-U.S. Developed Markets		17%		10% to 24%
International Equity ETF, International Large Cap Value ETF, International Small Cap Value ETF

Emerging Markets			10%	3% to 17%
Emerging Markets Equity ETF, Emerging Markets Value ETF

Sector Equity				3%	1% to 6%
Avantis Real Estate ETF
It definitely seems like they're basically emulating DFA global equity. Again, if I weren't so burned out on tinkering with my portfolio and were just starting out I'd probably use this as my sole equity fund, but I'm content with my equity portfolio as is for now.
I kinda agree. I spitballed what the Fund of Funds would look like, modeling it after an iShares AOX type of fund and it looks like this:

Code: Select all

US Equity:
AVSC - Small Cap Blend - 15%
AVUV - Small Cap Value - 15%
AVLV - Large Cap Value - 15%
AVUS - Large Cap Blend - 20%
AVRE - Real Estate - 5%

International:
AVDE - International Blend - 5%
AVUV - International Small Cap Value - 7%
AVIV - International Large Cap Value - 5%

Emerging Markets:
AVEM - Emerging Blend - 6%
AVES - Emerging Small Cap Value - 7%

Oddly enough, the fees are registered but I can't imagine this being any less than 1.25% on an ER based on the stacking they're doing with their EM and International funds having a heavier ER based on risk. I would imagine that this allows Avantis to aggregate quite a bit more to funds that are under lower AUM's to justify the price tag of entry. WIll be interesting to watch and for a newcomer, an interesting option.
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comeinvest
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Re: New Avantis worldwide ETF with value tilt

Post by comeinvest »

quietseas wrote: Wed Jun 29, 2022 9:15 pm Any thoughts on why this is an "ETF of ETFs" not a single portfolio which would give them potentially more efficient tax management especially since it is equity only no bonds? It almost seems like a partial effort.

Code: Select all

					Target Weight	Target Range
US Equity				70%		63% to 77%
US Equity ETF, US Small Cap Equity ETF, US Large Cap Value ETF, US Small Cap Value ETF

Non-U.S. Developed Markets		17%		10% to 24%
International Equity ETF, International Large Cap Value ETF, International Small Cap Value ETF

Emerging Markets			10%	3% to 17%
Emerging Markets Equity ETF, Emerging Markets Value ETF

Sector Equity				3%	1% to 6%
Avantis Real Estate ETF
It seems like they intend to rebalance between the constituent asset classes or subclasses based on defined rebalancing bands.

I'm curious if there is an expected outperformance from rebalancing (rebalancing bonus) inherent in this strategy vs. a passive total market approach.

I posted a similar question in another thread: viewtopic.php?p=6808828#p6808828
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Re: New Avantis worldwide ETF with value tilt

Post by CletusCaddy »

UpperNwGuy wrote: Tue Jun 28, 2022 8:41 pm Seems overly complicated. I'm guessing that you could construct a fund with the same returns with fewer constituent ETFs.
The value of an all-in-one fund like this is the automatic rebalancing, which mitigates behavioral risk. For example, I know for a fact that I am holding less international than I should be. A fund like this will prevent that.

I’m all in once it launches
Nahtanoj
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Re: New Avantis worldwide ETF with value tilt

Post by Nahtanoj »

Booogle wrote: Thu Jun 30, 2022 7:09 am
quietseas wrote: Tue Jun 28, 2022 8:44 pm No for me, but if I did it would be tax advantaged only, definitely not taxable.
Why is that?

Fund-of-funds are very tax efficient.

Distributions will be held inside the ETF as cash instead of being spit out.
Why wouldn't the periodic rebalancing among the underlying funds produce taxable events? Is there something about the ETF structure that avoids that?
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typical.investor
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Re: New Avantis worldwide ETF with value tilt

Post by typical.investor »

Nahtanoj wrote: Fri Aug 05, 2022 2:48 pm
Booogle wrote: Thu Jun 30, 2022 7:09 am
quietseas wrote: Tue Jun 28, 2022 8:44 pm No for me, but if I did it would be tax advantaged only, definitely not taxable.
Why is that?

Fund-of-funds are very tax efficient.

Distributions will be held inside the ETF as cash instead of being spit out.
Why wouldn't the periodic rebalancing among the underlying funds produce taxable events? Is there something about the ETF structure that avoids that?
For the same reason that rebalancing of individual stocks in an ETF don't generate capital gains. That is, of course, until you sell the fund and pay the gains then.

So yes, there is something about the ETF structure. This is why Vanguard has an ETF share class on many of its funds. It's desirable from a tax perspective when held in a taxable account.

But no, actually fund-of-funds are not necessarily very tax efficient. You can see this in Target Date Mutual funds that hold ETFs. Since they are mutual funds, they do issue capital gains when they sell to rebalance. And fund-of-funds that are mutual funds that hold other mutual funds offer no advantage.
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Re: New Avantis worldwide ETF with value tilt

Post by Nahtanoj »

So, just to be clear, does the ETF fund of funds “sell” a fund that is overweight in its portfolio by delivering shares of that fund to an Authorized Participant in exchange for ETF shares that the Authorized Participant is redeeming?

And does the ETF fund of funds “buy” a fund that is underweight in its portfolio by issuing newly issued ETF shares to an Authorized Participant in exchange for shares of the fund that is underweight?

(This is the process that is usually described for how the complete ETF portfolio is transferred between the ETF and an Authorized Participant, but I wasn’t aware it could also be used to adjust the percentages of individual components within an ETF’s portfolio.)
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typical.investor
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Re: New Avantis worldwide ETF with value tilt

Post by typical.investor »

Nahtanoj wrote: Fri Aug 05, 2022 4:42 pm So, just to be clear, does the ETF fund of funds “sell” a fund that is overweight in its portfolio by delivering shares of that fund to an Authorized Participant in exchange for ETF shares that the Authorized Participant is redeeming?
No, I wouldn't expect a fund to do that. And I wouldn't expect them to need to for that tax benefit.

If the Avantis ETF world fund sells, for example, emerging small cap value because it is overweight, they wouldn't necessarily need to deliver shares to do so. They could just sell the shares and incur a capital gain. This is the same for any ETF holding an individual stock.

Then, when the Avantis ETF world fund need to creates/eliminates shares, the capital gain incurred by the emerging small cap value would get washed out by an authorized participant. This is the same as an ETF holding individual stocks.
Nahtanoj wrote: Fri Aug 05, 2022 4:42 pm And does the ETF fund of funds “buy” a fund that is underweight in its portfolio by issuing newly issued ETF shares to an Authorized Participant in exchange for shares of the fund that is underweight?


(This is the process that is usually described for how the complete ETF portfolio is transferred between the ETF and an Authorized Participant, but I wasn’t aware it could also be used to adjust the percentages of individual components within an ETF’s portfolio.)
Well, when VBR (Vanguard small value) adjusts it's holding as stocks grow or no longer meet the value criteria and move out of the index OR stocks shrink or become value stocks and move into the index, what happens? Aren't the percentages of individual components within an ETF’s portfolio (VBR) being adjusted?

So I wouldn't expect the World Fund to return shares when it rebalances, nor that it would have to for the tax benefit. I think the fund could sell shares of the component funds as normal. and authorized participants could create/redeem shares as normal. And if the fund was selling a lot of shares, they probably would ring up the authorized participants to help them do that. But I doubt the fund itself is splitting up the component funds into individual holding OR accumulating the individual holdings to increase shares. That is the AP's function.

That'd be my guess anyway.
Last edited by typical.investor on Fri Aug 05, 2022 5:01 pm, edited 1 time in total.
quietseas
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Re: New Avantis worldwide ETF with value tilt

Post by quietseas »

It's not clear to me that an "ETF of ETFs" is the same thing as an ETF of individual stocks from a tax benefit perspective. I understand how ETF creation/redemption works, and how heartbeat transactions work. It's less clear to me how this would in practice work for an ETF of ETFs that only has 4 holdings, and I don't want to make ill-informed assumptions.
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typical.investor
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Re: New Avantis worldwide ETF with value tilt

Post by typical.investor »

quietseas wrote: Fri Aug 05, 2022 5:00 pm It's not clear to me that an "ETF of ETFs" is the same thing as an ETF of individual stocks from a tax benefit perspective. I understand how ETF creation/redemption works, and how heartbeat transactions work. It's less clear to me how this would in practice work for an ETF of ETFs that only has 4 holdings, and I don't want to make ill-informed assumptions.
Yeah, I am making an assumption that holding ETFs would be the same as holding individual stocks. ETFs trade like individual stocks so I don't see why they would be different.

An ETF selling to change its holding of individual stocks will be subject to potential capital gains. Those gains will be washed out in share creation/dissolution though.***

Why would an ETF holding other ETFs be any different? I don't see why, but yes I am assuming that it isn't. Of course, ETFs with large stock outflows won't be able to wash out their capital gains and this is seen with bond ETFs sometimes. If people use the World Value ETF to try and time the value premium, perhaps we'd see capital gains.

***resulting in a higher cost basis of course so someday when the fund is sold, taxes will eventually have to be paid but not until sold by the ETF holder
IndyMachiner
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Re: New Avantis worldwide ETF with value tilt

Post by IndyMachiner »

When is this fund supposed to hit the market?
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Re: New Avantis worldwide ETF with value tilt

Post by DaufuskieNate »

IndyMachiner wrote: Fri Aug 12, 2022 11:20 am When is this fund supposed to hit the market?
End of September or thereabouts is my understanding.
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