Avantis Investors Launches AVDS ETF to Capitalize on Valuation Spread in International Small Cap Stocks

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Avantis Investors, a specialist in active ETFs with $25 billion assets under management across 22 funds, has unveiled the Avantis International Small Cap Equity ETF (AVDS). The actively managed ETF aims to leverage the growing valuation gap between U.S. and international stocks, focusing on small cap companies outside the United States. Operating as a systematic active ETF, AVDS doesn’t follow a specific index but relies on quantitative rules rather than traditional stock picking.

In recent years, large cap stocks have outperformed small cap stocks, and U.S. equities have surpassed international markets, with this trend being further amplified by a handful of mega-cap companies during this year’s market rally.

While investing in smaller companies was once believed to carry a return premium, subsequent research has cast doubts on the existence of a size premium, challenging the Fama-French three-factor model. Phil McInnis, the chief investment strategist at Avantis, shares this view, stating that the firm doesn’t find a theoretical basis for a size premium. The AVDS ETF presents investors with an opportunity to take advantage of the potential value in international small cap stocks in the context of evolving market dynamics.

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