Core Insights - The proliferation of ETFs since the introduction of the ETF rule in 2019 has led to significant growth in active ETFs, which combine the benefits of active management with the flexibility of ETFs [1] - Active ETFs, such as those offered by American Century Investments, have evolved to provide lower costs and diversification while maintaining active management strategies [2] Active ETF Growth - The Avantis U.S. Small Cap Value ETF (AVUV) exemplifies the successful integration of active management and ETF structure, achieving over $5.5 billion in assets under management (AUM) in the past year, bringing total AUM to over $20 billion [3] - The strategy of AVUV has yielded a return of 12.1% over the last three months, showcasing the effectiveness of its systematic investment approach [3] New Product Launches - American Century Investments has launched two new active ETFs, the American Century Small Cap Value Insights ETF (ACSV) and the American Century Small Cap Growth Insights ETF (ACSG), which focus on small-cap firms through fundamental research [4][5] - Both ACSV and ACSG charge a fee of 49 basis points and aim to construct portfolios based on value and growth perspectives, respectively [5] Investment Strategy - The combination of ACSV and ACSG allows for a deep active investing focus while leveraging the tradability of ETFs, enhancing overall portfolio strategies [6] - Active ETFs are designed to cater to various risk tolerances and investment goals, with AVUV, ACSV, and ACSG representing a few examples of the category's growth [6]

Core Insights - The Avantis U.S. Small Cap Value ETF (AVUV) has crossed $20 billion in assets under management, reflecting strong investor interest in small-cap value strategies [3][4] - The ETF is positioned to benefit from a potential market rotation away from large-cap growth stocks, especially as the Federal Reserve is expected to cut interest rates [5][10] - AVUV employs a strategic, active management approach with a diversified portfolio of over 700 holdings and low turnover, focusing on high-quality, undervalued companies [11][12] Fund Performance and Strategy - Despite a challenging year for small-caps, AVUV has maintained a strong track record, consistently performing close to the top quartile of its peer group [13] - The fund's expense ratio is relatively low at 25 basis points, making it an attractive option for investors seeking exposure to small-cap value [5][14] - The active management style of AVUV is characterized as "active-lighter," allowing for strategic adjustments without frequent trading [12] Market Outlook - There is optimism that small-cap value stocks could perform well as the new year approaches, particularly if market conditions favor smaller companies [9][10] - The potential for increased merger activity in 2026 could further enhance the attractiveness of small-cap investments [10] - Historical data suggests that small-caps may offer better long-term returns compared to large-caps, especially as they are currently trading at a discount to their historical levels [8][6]

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]