Avantis Emerging Markets Value ETF (AVES)

The Avantis Emerging Markets Value ETF (ticker AVES) is an exchange-traded fund that tracks a diversified portfolio of stocks from companies in emerging markets — countries like Brazil, India, China, and Mexico that are further along in development than frontier economies but not yet at the maturity of the developed world. Unlike a conventional emerging-market index fund that holds everything, AVES applies a value tilt: it weights its holdings toward stocks that trade at lower prices relative to their earnings, cash flow, and book value, on the theory that such stocks have historically outperformed expensive ones over long periods.

What it holds and why

AVES holds roughly 2,000 to 3,000 stocks from emerging-market countries, but does not hold them equally. The fund is structured to overweight companies trading at lower valuations and underweight those trading at higher prices. This value tilt is the fund’s defining characteristic — it is not a neutral bet on emerging markets as a whole, but rather a specific wager that value stocks will outperform growth stocks within that universe.

The fund’s holdings span sectors typical of emerging economies: financial services, energy, materials, consumer discretionary goods, utilities, and telecommunications. These are often the cash-generative parts of developing economies where capital can be deployed at high returns. Because emerging markets tend to be less mature than developed ones, they often produce more natural value traps — stocks that look cheap because they are — which makes a value discipline particularly important in this region.

“Value is not value just because it looks like value” — and nowhere is that clearer than in emerging markets.

AVES is sponsored by American Century Investments (now part of Avantis Investors, formed from American Century’s systematic equity division). The fund uses a mechanical index-based approach to select and weight its holdings, meaning the portfolio is determined by a defined set of value criteria applied consistently rather than by a fund manager’s judgment call on which emerging-market stocks will win. This removes emotion and bias from the stock-picking process.

Structure and costs

AVES is a traditional exchange-traded fund, not a leveraged or inverse product. It trades on a stock exchange like any other ETF or stock, meaning investors can buy and sell shares throughout the trading day at market prices. The fund is funded entirely by the investors who own it — unlike a hedge fund, there is no separate capital source or fee tier. When someone buys a share of AVES, that money flows in; when they sell, the money flows out.

The fund’s total expense ratio — the annual fee expressed as a percentage of assets — is modest, reflecting its indexed, low-touch design. Because the fund is not paying a team of active stock-pickers, management fees are a fraction of what an actively managed emerging-market fund would charge. The fund will occasionally rebalance its holdings to maintain its value tilt and to track its underlying index, which generates some trading costs.

The real risks in emerging-market value

Emerging markets carry inherent risks that developed markets do not. Currency volatility is the most immediate: if you are a U.S.-dollar investor, the returns of a Brazilian or Indian stock are buffeted both by the local stock price and by the strength or weakness of the Brazilian real or Indian rupee against the dollar. A stock can go up while the currency goes down, eroding your gain, or vice versa. AVES does not hedge this currency risk — it passes that volatility through to the investor.

Emerging markets are also more exposed to political disruption, regulatory change, and the kind of economic volatility that can hit a developing economy hard. A tax change, a sanctions regime, a change of government, a banking crisis, or a commodity crash can move these stocks with a force you would rarely see in developed-market stocks. Value stocks in emerging markets carry an extra layer of risk: they may be cheap because they are genuinely good long-term bets, or they may be cheap because the market correctly sees a worsening competitive or regulatory position. The value tilt makes this bet explicit — it increases exposure to the cheapest stocks, which means exposure to that uncertainty.

The fund is also concentrated by region and sector: China, Taiwan, South Korea, and India together make up a large share of market capitalization in emerging markets, so AVES will naturally tilt toward them. Within those countries, energy, materials, and financials are often the largest sectors. This can create periods where the fund’s returns diverge sharply from those of developed markets.

Finally, there is the question of whether value actually outperforms in emerging markets over the holding period of a given investor. Value has been a historically resilient factor, but past performance is not guaranteed, and the relationship between price and future return is probabilistic, not deterministic. Some periods see growth stocks win decisively, and emerging-market growth stocks can outpace emerging-market value stocks for years at a time.

How to research AVES

An investor considering AVES should start with the fund’s prospectus and fact sheet from Avantis Investors, which will detail the exact methodology for selecting and weighting the value index the fund tracks. The index construction document will show how the fund defines “value” — which metrics it uses, how it weights them, and how often it rebalances.

For context on emerging markets themselves, the MSCI Emerging Markets Index is the benchmark most investors use to measure the health and returns of the broader emerging-market asset class. Understanding how AVES performs relative to that benchmark, and relative to other emerging-market value ETFs, provides a sense of whether the fund’s value tilt is working as intended.

Finally, investors should monitor the macroeconomic picture in key emerging markets — Chinese growth, Indian policy shifts, Brazilian interest rates — as these drive long-term returns more than any fund mechanic does. The emerging-market opportunity set is always changing, and what makes emerging-market value attractive in one decade may not be true in the next.