Avantis Expands Equity Funds by Adding Emerging Markets ESG ETF

Published on: 5 April 2022 04:56 PM
by KnowESG

Avantis Investors, which focuses on offering diversified investment solutions, has expanded its suite of multi-factor equity funds by adding an emerging markets ETF. The add-on aims to accelerate socially responsible investments.

The new equity fund, The Avantis Responsible Emerging Markets Equity ETF (AVSE US), has been listed on NYSE Arca with an expense ratio of 0.33 per cent.

The fund will enhance the Avantis Responsible International Equity ETF (AVSD US) and the Avantis Responsible US Equity ETF (AVSU US) launched last week. It also targets US and global developed ex-US equity markets. The three funds represent Avantis' first ESG-tailored products.

Chief Investment Officer Eduardo Repetto and Senior Portfolio Managers Ted Randall, Mitchell Firestein, and Daniel Ong will manage all three ETFs.

The funds will outperform their broad market performance benchmarks, the MSCI USA IMI Index, MSCI World Ex-USA IMI Index, and MSCI Emerging Markets IMI Index, by ruling out firms based on values, climate and norms-based screening.

Avantis Utilises insights from MSCI and Sustainalytics ESG research to get rid of companies having weak ESG profiles, involved in climate-related controversies, companies having low corporate governance scores, firms in oil and gas fields, factory farming, cannabis, gambling, adult entertainment, controversial weapons, palm oil, and tobacco.

Avantis will select securities based on a systematic investment strategy, which gives a significant weightage to firms with smaller market capitalisation, lower valuation, and higher profitability ratios.

The strategy, according to Avantis, combines the benefits of indexing, such as diversification, low turnover, transparency, and tax efficiency, with the opportunity to add value by progressively capturing factor returns using information available in current pricing.

The portfolio management team carefully analyses whether the predicted advantages of a trade outweigh its related trade costs and risk, keeping implementation costs under tight control.