AVES targets the cheapest, most profitable companies in emerging markets, betting that EM value stocks will outperform growth over time. This fund exists for investors who believe emerging market inefficiencies create bigger mispricings than in developed markets.
How It Works
The fund uses a systematic approach combining traditional value metrics (price-to-book, price-to-earnings) with profitability screens to avoid value traps. It overweights smaller companies and those with stronger profitability relative to market-cap weighted EM funds. Holdings span across China, India, Taiwan, Brazil, and other emerging markets with quarterly rebalancing to maintain value tilt.
Key Features
- Deeper value exposure than typical EM funds — targets bottom 30% by valuation metrics
- Profitability filter excludes zombie companies that plague many EM value strategies
- Small-cap tilt captures size premium alongside value factor in less efficient markets
Risks
- Value stocks can underperform for years — EM value lagged growth by 40%+ from 2017-2020
- Currency risk from unhedged exposure — a 10% dollar rally cuts returns directly
- China allocation (typically 25-35%) creates regulatory and geopolitical concentration risk
Who Should Own This
Best for patient investors with 7+ year horizons who want to diversify their factor exposures globally and can stomach significant tracking error versus standard EM benchmarks. Works as a satellite holding (10-20% of EM allocation) for those who already own broad EM exposure but want to tilt toward value without abandoning quality screens.