Many investors have moved to add significant foreign equities exposure this year, rewarding them with strong performances and returns. Of course, not every segment of international equities is the same. Emerging markets and developed markets offer different opportunities, with differing interest rate and macroeconomic factors at play. One emerging markets ETF, AVEM, has seen major inflows this year amid strong performance, inviting a closer look at its approach and holdings.
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The Avantis Emerging Markets Equities ETF (AVEM) charges a 33 basis point (bps) fee for its approach. The fund actively invests in emerging markets stocks across all capitalizations. In aiming to outperform the MSCI Emerging Market IMI Index, the fund leans into small cap firms with strong profits and low valuations. At the same time, its managers look to underweight large caps with low profits and higher price-to-book values.
Together, that has helped the active emerging markets ETF return 31.5% YTD per ETF Database. That has outperformed both its ETF Database Category and Factset Segment averages. Those came in at 24.3% and 24.5%, respectively as of October 7th. What’s more, the fund has outperformed over the last three and one month periods, too with significant flows. It has added more than $4 billion YTD per ETF Database.
Which stocks, then, has the ETF chosen for its investors this year? Three particular stocks can help explain the fund’s strategy so far.
To start, it’s of course hard to ignore firms like Tencent Holdings (TCEHY) has returned 62.2% YTD, a strong performance for its investors. The electronic entertainment powerhouse remains a key part of many emerging markets strategies.
