Brandes U.S. Value ETF (BUSA)

Brandes U.S. Value ETF (BUSA) is an actively managed exchange-traded fund that applies value-investing principles to select large US companies trading at discounts to their estimated intrinsic value, seeking long-term capital appreciation through disciplined bottom-up security selection.

The Brandes approach: Graham and Dodd value investing applied

BUSA is managed by Brandes Investment Partners, an independent firm founded in 1974 by Charles Brandes, who studied under Benjamin Graham, the father of value investing. The fund’s investment philosophy draws directly from Graham’s work: buy securities that trade at substantial discounts to their calculated intrinsic value, establish a margin of safety, and hold for patient returns. This is not growth investing (buying companies expected to expand rapidly) nor is it momentum investing (buying what has already risen). It is contrarian: seeking companies the market has priced too cheaply, waiting for the market to recognize that value, and capturing the resulting upside.

The Brandes research process begins with rigorous, bottom-up fundamental analysis. Portfolio managers examine company financial statements, competitive positioning, management quality, and long-term competitive advantages. They build independent estimates of each company’s intrinsic worth based on expected future cash flows, competitive durability, and capital allocation. Then they compare that estimate to the market price. Only when the market price sits at a meaningful discount — the “margin of safety” — does a company enter the fund. This discipline is both the fund’s strength and its limitation: it requires patience during periods when value stocks are unfashionable, and it frequently leaves cash uninvested when few securities meet the criteria.

Active management and the investor base

BUSA is actively managed, meaning that Brandes portfolio managers make all security-selection decisions; the fund does not track an index passively. This active approach carries costs: a 0.60% expense ratio, which is moderate for an actively managed fund but far higher than passive value index ETFs (which charge 0.05%–0.15%). Investors choosing BUSA are implicitly betting that Brandes’ bottom-up research and disciplined value discipline will generate returns above their benchmark (typically the Russell 1000 Value Index) that exceed the fee difference and cover trading costs. That is not guaranteed, and value strategies can underperform broad-market approaches for years at a time.

BUSA was launched in October 2023, making it a relatively young product despite Brandes’ 50-year track record managing money for institutional clients and other funds. The fund invests in US companies with market capitalizations exceeding $5 billion, focusing on the large-cap and mid-cap value opportunity set. Since inception, BUSA has demonstrated positive returns, though the fund is too new to establish a meaningful long-term performance track record relative to category peers.

How BUSA differs from other value approaches

Passive value index ETFs (such as those tracking the Russell 1000 Value Index) mechanically buy all stocks that meet a value screen (low price-to-book ratio, low price-to-earnings, high dividend yield, and so on) and weight them by market capitalization. BUSA does not follow a mechanical screen. Brandes analysts reject companies even if they appear cheap on multiple metrics if the underlying business is structurally weak, the competitive position is eroding, or management appears to be destroying shareholder value. Conversely, they may buy a modestly valued company if the research suggests it is undervalued because the market has temporarily mispriced it.

This active selectivity can be an advantage (avoiding cheap-for-a-reason companies that will continue to deteriorate) or a disadvantage (missing out on rallies in cheap-but-improving companies that the market reprices upward). Over long periods, Brandes’ disciplined valuation process has been competitive with passive value approaches, though past results are not reliable guides to future performance.

The margins in value investing

Successful value investing requires discipline and patience. When a fund holds a company believed to be undervalued but the market continues to ignore that value — sometimes for years — the pressure on managers and investors is intense. Why hold a beaten-down company when the broad market is soaring? Why stick with a value strategy during a decade of growth-stock dominance? Brandes’ institutional track record suggests the firm has maintained discipline through such periods, but BUSA is new and investor patience will be tested in any prolonged period of value underperformance.

The fund’s $150 million in assets under management is moderate for an ETF; it is liquid enough for most retail positions but not so large that it guarantees tight bid-ask spreads. As BUSA grows, its size may actually improve its competitive advantage: Brandes will have more capital to deploy, potentially deepening the opportunity for disciplined security selection.

Liquidity, fees, and how to research BUSA

BUSA trades daily on the NASDAQ with prices updated throughout the trading session. The 0.60% expense ratio is transparent and competitive for an actively managed fund. An investor paying 0.60% annually is explicitly trusting Brandes to add at least that much value through superior stock picking; if you believe value investing is a hoax or that Brandes’ process will underperform passive peers, the fund is expensive, and a 0.04% passive value ETF is the better choice.

To evaluate BUSA, read Brandes’ detailed fund prospectus, which outlines the selection criteria, risk factors, and top holdings. Compare BUSA’s returns against the Russell 1000 Value Index (the typical value-stock benchmark) and against other actively managed large-cap value ETFs over whatever time period BUSA has history. Examine the fund’s top ten holdings and industry breakdown — does the portfolio look like value stocks you would expect from a Graham and Dodd analysis, or does it look like growth stocks with low valuations? Review turnover rates; a fund with 50%+ annual turnover may be trading too frequently, generating taxable gains and transaction costs. Finally, understand your own investment horizon: value investing demands patience and a 10-plus-year horizon. If you need returns next year, or if the prospect of underperforming a growth-heavy broad market for several years will tempt you to sell, passive index funds are more honest bets than active value strategies, regardless of Brandes’ quality.