Foreign equities investing has been one of the defining stories of the year. Even before 2025 got started, many investors were considering moving from underweight to neutral, at least, in ex-U.S. equities. Several events this year added tailwinds to that move, including tariff uncertainty and a monetary outlook gap between the U.S. and certain foreign markets. Emerging markets ETF strategies have benefitted in particular. One such ETF, AVEM, has performed for investors amid that market movement while adding more than $5 billion in YTD flows.
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The Avantis Emerging Markets Equity ETF (AVEM) has added $5.2 billion in net inflow since January 1 of this year according to ETF Database data. The strategy, which charges a 33 basis point fee, now has more than $15 billion in total ETF AUM as of December 2, placing it in the top-five emerging markets ETFs by that metric.
Top Five by AUM: Emerging Markets ETF AVEM
The strategy, from American Century Investments shop Avantis Investors, offers a particular approach. The emerging markets ETF looks to combine the benefits of indexing, like diversification, transparency, and limited turnover, with certain strengths of active. For example, it can adapt to new market information to make investment decisions. That can help set it apart from other emerging markets ETF strategies.
AVEM invests in small-cap firms with strong profits and low valuations in emerging markets. At the same time, its approach aims to underweight large-cap firms that offer lower profitability and higher price-to-book values.
Together, that has helped the fund produce strong returns to pair with its significant flows. AVEM has returned 31.9% YTD according to ETF Database data. That has outperformed the fund’s ETF Database Category average in that time. The strategy has also performed over the last one year, as well, returning 30% in that time, also beating its average.
What should investors make of the emerging market ETF’s outlook for the rest of the year? The U.S. domestic monetary situation, when compared to emerging markets’ own monetary pictures, has a role to play. Many emerging markets economies have much less inflation and are ahead in their rate cycles. That, and potential future U.S. tariffs and a declining dollar, could see AVEM present a strong option to enter 2026.
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