If You Invested in Avantis U.S. Quality ETF (AVUQ)

Avantis U.S. Quality ETF (AVUQ) is an actively managed exchange traded fund offered by Avantis Investors, an investment offering from American Century Investments. According to Avantis Investors, the fund is available on the NASDAQ Exchange and is designed as a low-cost active option for investors building out their asset allocations in U.S. equities.

The stated objective of Avantis U.S. Quality ETF is to invest primarily in a diverse group of U.S. companies across market capitalizations, market sectors and industry groups. Within this broad universe, the fund seeks securities of companies it expects to have higher returns by placing an enhanced emphasis on securities of companies with certain characteristics. These characteristics include higher profitability, prices the managers view as attractive relative to company financials, and/or smaller market capitalizations relative to others within the fund's investment universe.

AVUQ is described as a low-cost active strategy that uses the philosophy and implementation process applied across Avantis Investors strategies. The fund is part of a broader lineup of ETFs and mutual funds from Avantis Investors that span equities, fixed income and real estate. Avantis Investors itself was established in 2019 with a focus on providing well-diversified investment solutions intended to fit into asset allocations and combine the potential for outperformance with the consistency of indexing.

The fund is classified as non-diversified. Because of this classification, it may hold large positions in a small number of securities. The disclosure notes that if the fund maintains such positions, a price change in any one of those securities may have a greater impact on the fund's share price than would be the case for a diversified fund.

As an actively managed ETF that does not seek to replicate the performance of a specified index, portfolio management decisions for AVUQ are based on a range of considerations. The portfolio managers may consider fund requirements and standards, economic conditions, alternative investments, interest rates and various credit metrics when determining whether to buy or sell a security. The fund documentation notes that if these considerations are inaccurate or misapplied, the fund's performance may suffer.

Like other ETFs, Avantis U.S. Quality ETF involves investment risk. The disclosures emphasize that investment return and principal value of security investments will fluctuate, and the value at the time of redemption may be more or less than the original cost. They also state that past performance is no guarantee of future results and that diversification does not assure a profit or protect against loss of principal.

AVUQ forms part of the broader Avantis Investors platform, which is associated with American Century Investments, a global asset manager. The Avantis lineup includes strategies across multiple asset classes, and AVUQ adds an option focused on U.S. companies that exhibit characteristics the managers associate with higher expected returns, within an actively managed ETF structure.

Fund approach and investment focus

According to the fund’s description, the investment approach combines broad exposure to U.S. equities with a focus on certain company traits. By emphasizing securities of companies with higher profitability, valuations the managers consider attractive relative to financial metrics, and in some cases smaller market capitalizations within the fund’s universe, AVUQ seeks to tilt the portfolio toward characteristics the managers believe are associated with higher returns over time.

The fund invests across market capitalizations, sectors and industry groups in the U.S. market, rather than limiting itself to a single size segment or sector. Within that broad scope, the portfolio managers apply their criteria to select and weight securities, subject to the fund’s requirements and standards.

Role within the Avantis Investors and American Century Investments families

Avantis U.S. Quality ETF is part of the Avantis Investors lineup of ETFs and mutual funds. Avantis Investors was established in 2019 to help clients pursue their investment goals through well-diversified investment solutions that are intended to fit into asset allocations and combine the potential for outperformance with the consistency of indexing.

Avantis Investors is described as an investment offering from American Century Investments, a global asset manager. Within this context, AVUQ adds a U.S. equity strategy that applies the Avantis philosophy and implementation process in an actively managed ETF format, with a focus on company characteristics such as profitability, relative price and market capitalization within the fund’s universe.

Risk considerations and disclosures

The fund’s disclosures highlight several key points for investors to consider. AVUQ is an actively managed ETF that does not seek to replicate a specified index, and its performance depends on the portfolio managers’ decisions. The documentation notes that if the considerations used in security selection and portfolio construction are inaccurate or misapplied, the fund’s performance may be negatively affected.

As a non-diversified fund, AVUQ may hold larger positions in fewer securities than a diversified fund. This can increase the impact that price changes in individual holdings may have on the overall fund share price. The disclosures also reiterate that investment return and principal value will fluctuate, that the value at redemption may be more or less than the original cost, and that past performance does not guarantee future results. They further state that diversification does not assure a profit and does not protect against loss of principal.

Investors are directed in the disclosure to consider the fund’s investment objectives, risks, charges and expenses carefully before investing and to review the prospectus or summary prospectus, which contains more detailed information about the fund.