Investors keen on more exposure to moderate-sized companies have two new exchange-traded funds (ETFs) to consider.
On November 7, Avantis Investors launched two new active exchange-traded funds (ETFs) on the New York Stock Exchange (NYSE) – The Avantis U.S. Mid Cap Equity ETF (“AVMC”) and The Avantis U.S. Mid Cap Value ETF (“AVMV”).
The former, AVMC, delivers exposure to U.S. midcap companies from a broad swathe of sectors, while the latter, AVMV, focuses on value stocks. Avantis aims to realize outsized returns for investors by targeting firms with modest caps but higher profitability and value characteristics.
In October, Avantis launched a large-cap ETF and this month has also floated a new small-cap fund. Mitchell Firestein, one of the co-managers of the funds, said in a statement these are the firm's “first dedicated mid-cap solutions.” This has been a busy year for the fund issuer. With these latest additions, Avantis has launched a total of nine new ETFs this year.
“We now offer a full range of small cap solutions across global equity markets,” he added. “We always enjoy launching new funds and we are excited to add another small cap ETF to our lineup.”
Meet Me in the Middle?
For investors who are unsure about hedging with big or small companies, midcaps can offer a perfect ‘Goldilocks zone' in the investing world. Ranging between $2 billion and $10 billion in market capitalization, they may have more room to grow than large or mega-cap giants while still boasting better balance sheet stability than the little guys.
Nonetheless, in 2023, it was the heaviest hitters that won the day. The SPDR S&P MidCap 400 ETF, which tracks leading mid-sized storks, has returned just around one percent year-to-date. By comparison, the Russell 2000, the leading indicator for small-caps, is in the red roughly 2.5 percent over 2023. Meanwhile, the S&P 500, which tracks the largest 500 companies in U.S. markets, is up over 15 percent.
These are passive market benchmarks. Some investors may see improved odds for outsized gains in buying a fund that uses an active strategy to its allocation.
“Advisors have gained comfort with actively managed ETFs in 2023,” VettaFi's Todd Rosenbluth said of the double-launch. “Avantis has quickly emerged as a leader in the space with their low-cost strategic funds. It is great to see their lineup expand.”
However, as with all investing strategies, the risk of large losses remains. Moreover, despite active being in vogue with traders lately, many studies show it continues to lag behind passive. In a Morningstar study of nearly 3,000 active funds, only 43% outperformed their average passive peer in 2022.
AVMC has an expense ratio of 0.18 percent, while AVMV charges investors 0.20 percent annually. By contrast, their most recent small-cap ETF, focused on emerging market stocks, charges 0.30 percent, while their latest large-cap fund charges 0.15 percent.
This article was produced and syndicated by Wealth of Geeks.