The Case for Adding International Small-Caps

Core Insights - The strong performance of international equities and foreign firms has been a significant trend in 2025, with many investors initially underweight in ex-U.S. stocks, but tariff concerns and attractive valuations have led to increased interest in foreign equities ETFs [1] - International small-caps are particularly appealing due to their relative affordability compared to other international equities, providing a lower cost entry point for investors [2] - The interest rate environment abroad, especially in markets like Japan, is favorable for international small-caps, as they often rely on borrowing for growth, benefiting from lower debt costs [2] Fund Performance - The Avantis International Small Cap Value ETF (AVDV) has shown robust performance, returning 39% year-to-date, outperforming its ETF Database Category and FactSet Segment averages [3] - AVDV focuses on firms with strong fundamental criteria, including cash flow, price-to-book value, revenue, and expenses, and charges a fee of 36 basis points [3] - The fund's strategy and performance make it a valuable addition to an equities portfolio, especially amid ongoing U.S. economic uncertainty [4]