Avantis All Equity Markets Value ETF (AVGV)

The Avantis All Equity Markets Value ETF (ticker AVGV) is an exchange-traded fund that holds stocks from around the world — every developed and emerging market — but with a deliberate tilt toward companies trading at lower valuations. The fund does not hold the entire world stock market equally; instead, it overweights stocks that appear cheap by fundamental measures and underweights those that appear expensive, applying a global value discipline across thousands of companies.

From broad-market indexing to factor tilts

When index investing first emerged in the 1970s and 1980s, the standard approach was simple: hold every stock in a market in proportion to its size, and capture the market return at minimal cost. Vanguard’s index funds pioneered this approach, and it became the foundation of passive investing. For decades, that was the state of the art: cap-weighted indices, low fees, done.

Beginning in the 1990s and accelerating in the 2000s, academic researchers and practitioners began to ask whether holding everything equally was actually the best way to structure a passive portfolio. They noticed patterns: stocks that were cheaper — relative to earnings, cash flow, or book value — tended to outperform expensive stocks over long periods. Similarly, smaller stocks tended to outperform larger ones, and stocks with more stable earnings tended to outperform volatile ones. These patterns became known as “factors,” and a new generation of index funds built around them emerged.

The value factor became one of the most researched and debated in finance. It has a long historical track record — value has outperformed growth over multiple centuries and across many markets. But it is not constant. There are long stretches, sometimes decades, where value lags growth, and knowing whether you have the conviction and capital to hold on through those periods is central to whether a value tilt works for you.

How AVGV works today

AVGV is built on the principle that the entire world’s stock market offers better opportunities if you systematically tilt toward value stocks. Rather than hold the world in market-cap weight, the fund identifies stocks trading at low multiples of earnings, cash flow, and book value across developed and emerging markets, and overweights them. The fund may hold ten thousand or more stocks — it does not cherry-pick; it is mechanical — but they are weighted to give more capital to the cheapest ones.

The developed-market portion of AVGV includes North America, Europe, Japan, Australia, and other mature economies, all with a value tilt applied consistently. The emerging-market portion does the same for China, India, Brazil, and the rest. By applying value criteria globally, the fund makes a single bet: that valuation multiples are meaningful everywhere, and that cheap is better than expensive as an organizing principle for allocating capital around the world.

The fund is sponsored by Avantis Investors, part of American Century Investments, which has built systematic, factor-based strategies across multiple geographies and asset classes. Avantis was created specifically to manage these kinds of tilted-index strategies, applying research on factor returns to build portfolios that are index-like in their breadth but value-tilted in their structure.

Capital flows and fund economics

AVGV is funded entirely by the investors who own it. When investors buy shares, capital flows in; when they redeem, it flows out. The fund does not borrow money or use leverage — it is a straightforward mutual fund converted to ETF form. The investors’ capital is the only source of funding.

The fund’s expenses are kept low because the portfolio is mechanically constructed from a published index; there are no stock-pickers making discretionary decisions. The expense ratio qualitatively is modest — much lower than an actively managed global value fund, but slightly higher than a cap-weighted global equity ETF because the value tilt requires more frequent rebalancing to maintain. As valuations shift and companies move from cheap to expensive categories, the fund must adjust weights to keep the tilt intact.

The fund generates modest capital gains and dividend distributions as stocks within it pay dividends and the portfolio is rebalanced. Investors are responsible for the tax consequences of those distributions, though the mechanical, index-like approach typically generates fewer taxable gains than an actively managed fund would.

The value tilt’s risks and constraints

By definition, AVGV overweights the stocks the market thinks are least attractive. Sometimes that is correct — those stocks go on to outperform, and the value tilt proves prescient. Sometimes it is wrong — those stocks remain cheap because the market sees genuine deterioration, and the tilt underperforms.

The most immediate risk is the currency risk embedded in any global equity fund. AVGV holds stocks in dozens of currencies, and the local stock-price return is one component; the currency movement against the dollar is another. A euro-denominated stock can rise in euros but fall in dollars if the euro weakens. Over long periods currency movements tend to mean-revert, but over shorter periods they can be dramatic.

There is also concentration risk within the global value universe. Because many countries and sectors tend to be value-friendly at the same time, AVGV will naturally tilt toward certain regions or sectors without the fund manager making any deliberate call. Periods where financials, materials, and energy stocks are cheap may see AVGV overweight those sectors relative to the broader market. If those sectors underperform, the fund suffers.

Finally, there is the specific risk of the value factor itself: it can underperform for extended periods. From roughly 2007 to 2021, growth stocks dramatically outperformed value stocks globally, and any fund with a value tilt suffered accordingly. This is why it is important for any investor considering AVGV to have a long time horizon and genuine belief in the value factor, rather than treating it as a short-term tactical bet.

How to research AVGV

An investor evaluating AVGV should begin with the fund’s prospectus and the index methodology document from Avantis Investors, which details exactly how “value” is defined and measured. Most value indices use a combination of price-to-earnings, price-to-book, price-to-cash-flow, and similar metrics; understanding which metrics AVGV emphasizes is crucial.

Comparing AVGV to other global value ETFs — such as those tracking the FTSE Value Factor Global Index or similar benchmarks — provides context for whether this particular tilt is in line with the mainstream approach or represents a specific variation. The composition and tracking error will reveal how closely the fund adheres to its index.

Investors should also monitor the value factor’s performance relative to growth. Academic research and industry sites publish periodic updates on value-factor performance, showing whether the long-term historical outperformance of value is continuing or stalling. This helps investors assess whether their value tilt is a temporary headwind or a sign that the factor’s historical premium is eroding. Finally, global macroeconomic conditions — interest rates, inflation, growth prospects — have a profound effect on value versus growth returns, and staying attuned to those conditions is part of sound research.