Alpha Architect Global Factor Equity ETF · NASDAQ:AAVM
Alpha Architect Global Factor Equity ETF — Alpha Architect — Conference Presentation (March 2025)
45 slides from Alpha Architect Global Factor Equity ETF's conference presentation, March 2025
Slide 1: The Case for International Equities
Different by design Alpha Architect The Case for International Equities 1
Slide 2: Standardized returns as of 12/31/2024
Different by design Standardized returns | as of 12/31/2024 Annualized 3 Yr. Annualized 5 Yr. Annualized 10 yr. Annualized Return 1 Yr. Total Return Total Return Total Return Since Inception Expense Ratios Name Ticker Inception Date NAV Mkt. NAV Mkt. NAV Mkt. NAV Mkt. NAV Mkt. Gross Net US Quant. Va
Slide 3: Standardized returns as of 12/31/2024 (third-party funds)
Different by design Standardized returns | as of 12/31/2024 Annualized 3 Yr. Annualized 5 Yr. Annualized 10 yr. Annualized Return 1 Yr. Total Return Total Return Total Return Since Inception Expense Ratios Name Ticker Inception Date NAV Mkt. NAV Mkt. NAV Mkt. NAV Mkt. NAV Mkt. Gross Net iShares Core
Slide 4: Important Information
Different by design IMPORTANT INFORMATION This information should not be relied upon as investment advice, research, or a recommendation by Alpha Architect regarding (i) the funds, (ii) the use or suitability of the model portfolios or (iii) any security in particular. Only an investor and their fin
Slide 5: Important Information
Different by design IMPORTANT INFORMATION Fixed income risks include interest-rate and credit risk. Typically, when interest rates rise, there is a corresponding decline in bond values. Credit risk refers to the possibility that the bond issuer will not be able to make principal and interest payment
Slide 6: Third-Party Fund Justification
Different by design THIRD-PARTY FUND JUSTIFICATION Alpha Architect model portfolios may include ETFs or other registered products issued by third-party companies with whom we are not affiliated. The inclusion of these third-party funds in our model portfolios does not constitute a recommendation, so
Slide 7: US stocks have dominated International stocks for 15+ years
Different by design US stocks have dominated International stocks for 15+ years 7
Slide 8: Total returns since 2010
Different by design Total returns since 2010 | US Lg. Blend, Foreign Lg. Blend, and Emerging Market funds 600% US Lg. Blend1 543% 500% Since 2010, US Stocks have 400% dominated foreign stocks Total return 300% 200% Foreign Lg. Blend2 140% 100% Div. Emg. Mkts.3 79% 0% Jan '10 Jan '13 Jan '16 Jan '19
Slide 9: But that's not always the case!
Different by design But that’s not always the case! 9
Slide 10: Different by design
Different by design Source: https://www.morningstar.com/stocks/us-stocks-have-outperformed-world-history-shows-that-success-can-be-fleeting. S&P 500 Index covers the 500 largest companies that are in the United States. MSCI EAFE Index tracks large cap and mid cap companies in developed countries aro
Slide 11: Opportunity is global
Different by design Opportunity is global Cumulative returns for US, International Developed, and Emerging Markets 248% 180% US stocks outperformed thanks, The shocks of 2020 and 2022 hampered global Total return in part, to low interest rates and growth through the first five years of the 2020s. Of
Slide 12: Why do we believe US stocks outperformed?
Different by design Why do we believe 1. Valuation repricing US stocks 2. Fundamentals outperformed? 3. Currency effects 12
Slide 13: Why do we believe US stocks outperformed?
Different by design Why do we believe 1. Valuation repricing US stocks 2. Fundamentals outperformed? 3. Currency effects 13
Slide 14: Valuation repricing
Different by design Valuation repricing • AQR argues long-term average returns can mislead investors. • Value investing underperformed since 1990, especially from 2018–2020, due to valuation shifts. • Adjusting for valuations suggests higher expected returns than recent performance implies. • Invest
Slide 15: Valuation repricing
Different by design Valuation repricing “Since 1990, the vast majority of the US’s outperformance versus the MSCI EAFE Index (currency hedged) of a whopping +4.6% per year, was due to changes in valuations. The culprit: In 1990, US equity valuations (using Shiller CAPE14) were about half that of EAF
Slide 16: Valuation repricing
Different by design Valuation repricing • International diversification remains valuable despite 30+ years of U.S. outperformance. • U.S. equities outperformed post-1990 due to rising valuations, which may not last. • High U.S. valuations suggest international markets could perform better ahead. Sou
Slide 17: Valuation repricing: P/E spread
Different by design Trailing P/E ratio (upper); US – Int’l P/E spread (lower) 50 Valuation repricing Valuations 40 surged post-2020 Spread between US and International equities has grown wider post-2020 P/E Ratio 30 US1 P/E Both markets experienced a run-up in 20 valuations, with US stocks earning h
Slide 18: Different by design
Different by design Source: JPMorgan. MSCI All Country World ex USA Index (MSCI ACWI ex USA) tracks the performance of large and mid-cap stocks across developed and emerging markets outside the United States. It serves as a broad benchmark for international equity markets. S&P 500 Index covers the 5
Slide 19: International stocks are trading at a discount to US peers
Different by design Based on current multiples, International stocks are trading at a discount to US peers. 19
Slide 20: Why do we believe US stocks outperformed?
Different by design Why do we believe 1. Valuation repricing US stocks 2. Fundamentals outperformed? 3. Currency effects 20
Slide 21: Fundamentals
Different by design Fundamentals • Beginning in 2012, the US began outearning its international peers (potentially due to fiscal and regulatory policy) • A few players in the States skewed the numbers • Should we bet on this occurring indefinitely? Source: TopDown Charts. https://entrylevel.topdown
Slide 22: Fundamentals
Different by design Fundamentals • Beginning in 2012, the US began outearning its international peers (potentially due to fiscal and regulatory policy) • A few players in the States skewed the numbers • But should we bet on this occurring indefinitely? Source: TopDown Charts. https://entrylevel.top
Slide 23: Why do we believe US stocks outperformed?
Different by design Why do we believe 1. Valuation repricing US stocks 2. Fundamentals outperformed? 3. Currency effects 23
Slide 24: Currency FX: Why has the US Dollar appreciated?
Different by design Currency FX | Why has the US Dollar appreciated? A positive number indicates a strengthening US Dollar. A negative number indicates a weakening US Dollar. Measured relative to a trade-weighted basket of advanced and emerging markets. 30 2022: Invasion of Ukraine fuels safe haven
Slide 25: Global interests: The Fed rate policy sets pace for peers
Different by design Global interests | The Fed rate policy sets pace for peers Effective Fed Funds, ECB Deposit Rate Facility, and BoJ Basic Discount Rate; monthly rate 8% 7% Rates increase to combat rising 6% inflation 5% 4% Central banks use Rate zero interest rate 3% policy to stimulate Fed raise
Slide 26: Why do we believe US stocks have outperformed International stocks?
Different by design Why do we believe US stocks have outperformed International stocks? Valuation repricing Over the past 15+ years, the U.S. market’s multiple of earnings (such as CAPE, also P/E) has increased over international stocks. Fundamentals Over the past 15+ years, U.S. companies have had
Slide 27: That's the past. What could be in the future?
Different by design That’s the past. What could be in the future*? (*impossible to truly know!) 27
Slide 28: Outlook: US vs. International scorecard
Different by design Outlook | US vs. International scorecard Advantage? Return driver Rationale US Int’l We believe there is a “limit” to US stock multiple expansion Valuations before investors favor International. Fundamentals Currency 28
Slide 29: Outlook: US vs. International scorecard
Different by design Outlook | US vs. International scorecard Advantage? Return driver Rationale US Int’l We believe there is a “limit” to US stock multiple expansion Valuations before investors favor International. US companies compensate CEOs for growing earnings. This is Fundamentals less common i
Slide 30: Outlook: US vs. International scorecard
Different by design Outlook | US vs. International scorecard Advantage? Return driver Rationale US Int’l We believe there is a “limit” to US stock multiple expansion Valuations before investors favor International. US companies compensate CEOs for growing earnings. This is Fundamentals less common i
Slide 31: Why consider international stocks now?
Different by design Why consider 1. Diversify record US market international stocks concentration now? 2. Lower correlation 31
Slide 32: Record concentration
Different by design S&P 500 | Percent in top-10 stocks Q4 '24 Record 38% 37.3% concentration 34% The S&P 500 has never been this concentrated 30% % of index Q4 '23 30.8% The ten largest stocks make 26% up 37.3% of the Index (as of Q4 2024) 22% 18% Q1 '19 Q1 '20 Q1 '21 Q1 '22 Q1 '23 Q1 '24 Source: Al
Slide 33: Significant overlap
Different by design Sector Ticker Weight P/E Ratio1 Significant overlap Info. Tech. AAPL 7.6% 39.7 Info. Tech. NVDA 6.6% 52.8 These companies often have a lot Info. Tech. MSFT 6.3% 33.9 of overlap, with similar market Cons. Disc. AMZN 4.1% 39.7 forces driving their results. Comm. Svcs META 2.6% 24.5
Slide 34: IVAL and IMOM may:
Different by design 6% IVAL 6% IMOM VALUE IVAL and IMOM may: IVAL 1. Diversify mega-cap concentration risk 18% Foreign 2. Tilt portfolio toward favorable Large Blend characteristics to potentially increase MOMENTUM 70% US Large Blend US Large Blend expected returns IMOM 3. Trade modest tracking erro
Slide 35: Diversify concentration risk
Different by design Diversify concentration risk 7.0% 6.0% 5.8% BEFORE1 AFTER2 37.6% 26.3% 4.9% 4.2% 4.3% 4.0% 3.0% 2.9% 2.3% 2.2% 2.1% 2.0% 1.9% 1.6% 1.5% 1.4% 1.7% 1.5% 1.3% 1.2% 1.0% AAPL MSFT NVDA AMZN META GOOGL TSLA AVGO GOOG BRK.B JPM Source: Alpha Architect, YCharts, FactSet. As of 12/31/202
Slide 36: Going all-in on US Stocks may make sense if:
Different by design Going all-in on US Stocks may make sense if: Option Key considerations Do you believe US stocks will continue to rise, given current valuations and 100% US concentration? 100% International How confident are you that now is the right time for international to shine? Not sure whic
Slide 37: IVAL or IMOM have outperformed Foreign Lg. Blend 5 of 9 years
Different by design IVAL or IMOM have outperformed Foreign Lg. Blend1 5 of 9 years '16 '17 '18 '19 '20 '21 '22 '23 '24 FGN. LG. FGN. LG. FGN. LG. FGN. LG. IVAL IMOM IMOM IVAL IVAL BLEND BLEND BLEND BLEND 9.04% 33.15% 29.24% -9.55% 20.12% -13.96% 23.06% 11.08% 5.16% FGN. LG. FGN. LG. FGN. LG. FGN. LG
Slide 38: Correlation table
Different by design Correlation table Foreign Lg. Div. Emerging US Lg. Blend Blend Mkts. IVAL IMOM QVAL QMOM US Lg. Blend1 1.00 Foreign Lg. Blend2 0.88 1.00 Div. Emerging 0.73 0.86 1.00 Mkts.3 IVAL 0.79 0.89 0.76 1.00 IMOM 0.83 0.87 0.75 0.77 1.00 QVAL 0.87 0.78 0.65 0.80 0.72 1.00 QMOM 0.79 0.65 0.
Slide 39: Global Beta+Factor Model portfolio
Different by design Global Beta+Factor Model portfolio Prospectus Ticker Exp. Ratio 0/100 10/90 20/80 30/70 40/60 50/50 60/40 70/30 80/20 90/10 100/0 IVV 0.03% - 3.90% 7.80% 11.70% 15.60% 19.50% 23.40% 27.30% 31.20% 35.10% 39.00% US STOCKS QMOM1 0.29% - 1.30% 2.60% 3.90% 5.20% 6.50% 7.80% 9.10% 10.4
Slide 40: Has the rotation to international begun?
Different by design Has the rotation to international begun? 12.50% IMOM 11.25% 10.00% Fgn. Lg. Blend1 9.79% 7.50% Total Return IVAL 5.00% 5.10% 2.50% 0.00% S&P 5002 Jan Feb Mar -0.45% -2.50% -5.00% Source: YCharts, Alpha Architect. Daily returns at NAV. 1/1/2025 – 3/5/2025. Past performance does no
Slide 41: Important Information
Different by design IMPORTANT INFORMATION This material has been distributed for informational purposes only and should not be considered investment advice or a recommendation of any particular security, strategy, or investment product. Information contained herein has been obtained from sources bel
Slide 42: Note on category average methodology
Different by design Note on category average methodology Constituents of a given category are determined by YCharts. As of 4/30/2024, the calculation method used to determine the category average’s returns changed to account for potentially different inception dates. Previously, a straight average o
Slide 43: Definitions
Different by design Definitions Correlation measures the degree to which two variables move in relation to each other. Higher correlation implies a tighter relationship. Max Drawdown measures the largest single drop from peak to bottom in the value of a portfolio before a new peak is achieved. It ma
Slide 44: RBICS Sector Definitions
Different by design RBICS Sector Definitions Business Services is composed of companies that offer services targeted toward businesses, including administrative, support, janitorial, and professional services. Consumer Cyclicals is composed of companies that offer products targeted toward individual
Slide 45: Size and Style Definitions
Different by design Size and Style Definitions Blend is assigned to portfolios where neither growth nor value characteristics predominate. Equity hedged strategies use a variety of means to protect the value of their equity exposure during times of market weakness. These funds may exchange equity ri
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