AVSD targets international developed market stocks while excluding companies that fail ESG screens, particularly those involved in controversial weapons, tobacco, or severe environmental violations. It's Avantis's answer to investors who want their systematic value tilt without the ethical baggage.
How It Works
The fund starts with developed international markets then applies both ESG exclusions and Avantis's signature profitability and value tilts. Companies get kicked out for UN Global Compact violations or involvement in specific industries, while the remaining universe gets weighted toward cheaper, more profitable firms. This creates an unusual hybrid — ESG constraints with active factor exposures rather than market-cap weighting.
Key Features
- Combines ESG screening with value/profitability tilts — rare in sustainable investing
- 2.74% yield suggests meaningful dividend exposure despite ESG constraints
- Avantis's systematic approach means lower costs than traditional active ESG funds
Risks
- ESG constraints could exclude 10-20% of benchmark, creating tracking error and sector biases
- Value tilt means extended underperformance possible during growth rallies (see 2018-2020)
- International exposure means full currency risk — yen or euro weakness directly hits returns
Who Should Own This
Best for investors who want international exposure but have ESG mandates or personal values that preclude owning certain companies. The factor tilts make this particularly suitable for those who believe in value investing but found themselves uncomfortable owning tobacco or defense stocks in traditional value funds. Not for those seeking pure market beta or US exposure.