On this episode of the "ETF of the Week†podcast, VettaFi's Head of Research, Todd Rosenbluth, discussed the Avantis U.S. Small Cap Value ETF (AVUV) with Chuck Jaffe of Money Life. The pair discussed several topics related to the fund to give investors a deeper understanding of the ETF. Chuck Jaffe: One fund, on point for today. The expert to talk about it. This is the ETF of the Week! Welcome to the ETF of the Week, where we get the latest take from Todd Rosenbluth, the head of research at VettaFi. And if y ...

Core Insights - Avantis Investors has surpassed $100 billion in total assets under management (AUM), driven by significant inflows into its largest ETF, AVUV, which recently exceeded $20 billion in AUM [1][2] - The Avantis U.S. Small Cap Value ETF (AVUV) has been a major contributor, adding approximately $4.5 billion in AUM since the start of 2025, with $1 billion coming from net inflows in the last three months [1][3] - AVUV charges a fee of 25 basis points and aims to combine the benefits of index tracking with active management [2] - Year-to-date, AVUV has returned 11.5%, outperforming its category average over the last three and five years with returns of 14% and 15.2%, respectively [3] - Avantis Investors offers five ETFs with over $10 billion in AUM and eight with over $1 billion, including AVUV and the Avantis Investors Core Fixed Income ETF (AVIG) with $1.4 billion in AUM [4] Industry Context - Avantis Investors is recognized as a significant player in the ETF expansion and product proliferation landscape, providing various options for investors looking to enhance their portfolios [5]

Group 1: Federal Reserve Actions - The Federal Reserve lowered interest rates by a quarter percentage point on December 10, 2025, marking its third cut of the year, bringing the benchmark federal funds rate to a range of 3.5% to 3.75% [1] - The decision revealed significant internal disagreement among policymakers, with some advocating for unchanged rates and others pushing for a larger cut, marking the first time since 2019 that such dissent occurred [3] - Fed Chair Jerome Powell described the current economic situation as "challenging," highlighting concerns about a softer labor market and inflation remaining above the 2% target [4] Group 2: Economic Outlook - The Fed's outlook for 2026 indicates limited easing ahead, projecting just one rate cut next year, with the Fed Funds rate expected to be 3.4% [5] - Real GDP growth projections have been increased for 2026 to 2.3%, with further increases for 2027 and 2028, while the unemployment rate is projected to decline slightly in 2027 [6] Group 3: Investment Opportunities - The Avantis U.S. Small Cap Value ETF (AVUV) is highlighted as a potential investment, benefiting from improved GDP growth projections and a less dovish interest rate policy [8] - The Invesco S&P Mid-Cap 400 Pure Value ETF (RFV) is positioned well due to high momentum in mid-cap stocks, easing trade tensions, and normalizing Fed rate policy [9] - The State Street SPDR S&P Bank ETF (KBE) is noted for its favorable conditions, including cheaper valuations and solid earnings growth, despite a softer labor market [10] - The Pacer US Cash Cows 100 ETF (COWZ) focuses on companies with high free cash flow yields, which are better positioned in a tighter credit market [11]

Core Insights - The Avantis U.S. Small Cap Value ETF (AVUV) has outperformed the Russell 2000 and S&P SmallCap 600 value indexes over the past three years, particularly benefiting from the Federal Reserve's accommodative monetary policy [1][2] Group 1: Interest Rate Sensitivity - Small-cap stocks, including those in the AVUV fund, are highly sensitive to changes in interest rates, which contributed to a 21% decline in the Russell 2000 index in 2022 when rates were increased [1][2] - The Federal Reserve's anticipated rate cuts are expected to create a favorable environment for small-cap ETFs like AVUV, potentially leading to outperformance as the economy gains momentum [2][5] Group 2: Fund Characteristics - AVUV is an actively managed ETF with a market capitalization of $18.31 billion, allowing for daily adjustments to the portfolio to capitalize on declining interest rates [3] - The fund's management can selectively avoid unprofitable companies, which constitute over 40% of the Russell 2000, while still benefiting from a potential rally in small-cap stocks [10][11] Group 3: Economic Exposure - Small-cap companies in the AVUV portfolio generate a higher percentage of domestic sales compared to large-cap firms, making them more directly tied to the U.S. economy's performance [6] - The sectors represented in AVUV, such as energy, financial services, and industrials, which make up 59% of the portfolio, are expected to benefit significantly from reduced financing costs and an accelerating economy [8]