Is the Brandes US Value ETF (BUSA) a Smart Bet for 2026

Key Takeaways

• Brandes U.S. Value ETF (BUSA) is a top-rated actively managed fund, recognized for its disciplined, contrarian value investing approach.
• Despite its relatively short operating history since October 2023, BUSA has demonstrated strong outperformance against its Large Value category peers over the past year.
• Investors should weigh BUSA's proven active management and robust stock selection against its notably higher expense ratio compared to category averages.

Is the Brandes US Value ETF (BUSA) a Smart Bet for 2026?

The investment landscape is shifting, with actively managed ETFs increasingly capturing investor attention as they seek to outperform traditional passive index strategies. Among these, the Brandes U.S. Value ETF (BUSA) has emerged as a notable contender, even earning a spot on Morningstar's "Best Active ETFs to Buy in 2026" list. This actively managed fund, launched on October 3, 2023, aims for long-term capital appreciation by primarily investing in U.S. equity securities. Its recent recognition underscores a growing appetite for strategies that promise more than just market replication.

BUSA currently trades at $39.21, reflecting a modest +0.10% gain on the day, with a market capitalization of $304.0 million. While its trading volume of 21,894 shares today might seem modest compared to some passive giants, it's typical for a newer, actively managed ETF of its size. The fund's 52-week range of $28.44 to $39.51 highlights a period of significant growth since its inception, positioning it near the upper end of its annual trading band.

The appeal of an active ETF like BUSA lies in its potential to navigate market complexities and capitalize on mispricings, a stark contrast to the broad-brush approach of index funds. This is particularly relevant in today's concentrated market, where a handful of mega-cap growth stocks have dominated returns, potentially leaving many portfolios inadvertently overexposed. For investors looking to rebalance towards value or seeking a differentiated approach, BUSA presents an intriguing option.

However, the decision to invest in an active ETF always involves a careful evaluation of its strategy, performance, and costs. BUSA's inclusion on "best of" lists suggests a strong underlying methodology, but its nascent track record demands a deeper dive into how Brandes Investment Partners intends to deliver on its promise of outperformance, especially against a backdrop where active management has historically struggled to consistently beat benchmarks.

What is Brandes' Core Value Investing Philosophy?

At the heart of BUSA's strategy is Brandes Investment Partners' deeply ingrained value investing philosophy, which draws inspiration from the foundational principles of Graham and Dodd. This isn't about chasing trends; it's a disciplined, bottom-up, and often contrarian approach focused on identifying U.S. companies trading below their estimated intrinsic value. The firm's long history, spanning over 40 years, has cultivated a culture that emphasizes independent judgment and a willingness to "swim against the tide" of popular opinion, even during challenging market cycles.

The investment process is rigorous and team-oriented, led by four experienced managers—Kenneth Little, Ted Kim, Brent Fredberg, and Brian Matthews—all of whom joined in 2023, aligning with the ETF's inception. Their average tenure of 2.33 years reflects a cohesive unit dedicated to executing this specific mandate. This stability in management is a critical factor for actively managed funds, as the expertise and consistency of the team directly impact investment outcomes.

Brandes' approach is characterized by a flexible, price-conscious search for value opportunities across the market spectrum. They don't confine their stock selection to only the cheapest-decile stocks; rather, they consider any company that presents an attractive "margin of safety" based on their thorough research. This broad view allows them to invest in a diverse range of companies, from high-quality franchises to potentially deeply discounted turnaround prospects, as long as they believe the market is mispricing their true worth.

This philosophy is particularly potent in exploiting behavioral biases that often lead to mispriced securities. By patiently holding positions and sticking with their convictions during periods of headwinds, Brandes aims to capture the long-term appreciation that often follows when the market eventually recognizes the true value of these overlooked companies. It's a testament to their belief that true value investing requires both intellectual rigor and emotional fortitude.

How Has BUSA Performed Against its Peers?

For an actively managed ETF, performance relative to its category is the ultimate litmus test, and BUSA has shown promising early results. As of January 31, 2026, the Brandes U.S. Value ETF has delivered a year-to-date (YTD) return of 4.4% (NAV), outperforming the Large Value category average of 3.9% by 0.6 percentage points. This strong start earned BUSA an AAII grade of 'B' for its YTD performance, indicating it ranks favorably within its peer group.

Looking at a longer, albeit still brief, horizon, BUSA's 1-year return (NAV) stands at an impressive 16.9%, with its price return closely mirroring this at 17.0%. This significantly outpaces the Large Value category average of 15.0% over the same period, demonstrating a 1.9 percentage point lead. Such consistent outperformance, even in its early stages, suggests that Brandes' bottom-up stock selection process is effectively identifying undervalued opportunities. The ETF also received a 'B' grade from AAII for its 1-year NAV return.

The context for this performance is important. The period since September 2020 has seen a resurgence in value stocks, following a prolonged stretch of growth stock dominance. Brandes' strategies, being inherently "levered to value," have historically tended to perform well during such value rebounds. The firm's internal analysis indicates that their portfolios have outperformed both the broader market and value indexes cumulatively since this turning point, aligning with the recent positive trajectory of BUSA.

While BUSA's inception date of October 3, 2023, means its full long-term track record is yet to unfold, these initial results are encouraging for investors seeking an active value strategy. The ability to consistently beat the category average, even by a few percentage points, can translate into significant alpha over time, especially when compounded. This early outperformance provides a tangible illustration of Brandes' disciplined approach in action.

What Does BUSA's Portfolio Look Like?

BUSA's portfolio construction reflects its deep value philosophy, focusing on a concentrated yet diversified selection of U.S. equities. The ETF holds 65 securities, with the top 10 holdings constituting 24.4% of its total assets. This level of concentration suggests conviction in their highest-conviction ideas while still maintaining a reasonable degree of diversification to mitigate idiosyncratic risks. The fund is classified as a diversified fund by SEC standards, ensuring it adheres to regulatory requirements regarding asset concentration.

The portfolio's sector allocation provides insight into where Brandes' value-oriented approach is finding the most compelling opportunities. As of January 31, 2026, the top three sectors are Financial Services (26%), Healthcare (22%), and Technology (14%). This weighting differs from broad market indexes, which often have a higher allocation to technology, indicating a contrarian tilt towards sectors where Brandes identifies greater value. For instance, top holdings include established names like Merck & Co Inc, Citigroup Inc, Textron Inc, Chevron Corp, and FedEx Corp, among others, reflecting a preference for large-cap companies with strong fundamentals.

A key characteristic of BUSA's holdings is its emphasis on quality. Nearly 65% of the portfolio boasts a wide economic moat, significantly higher than the 43% found in the Russell 1000 Value Index. This focus on companies with sustainable competitive advantages is a hallmark of Brandes' strategy, aiming to invest in businesses that can reliably generate profits and weather economic cycles. This high-quality tilt, combined with a market-cap weighting within its selection, helps the fund absorb market turbulence more effectively.

The ETF's portfolio turnover rate stands at a low 7%, which is substantially below the Large Value category average of 40%. This low turnover indicates a long-term investment horizon, where managers are willing to hold positions for extended periods, allowing their investment theses to play out. This patient approach not only aligns with a true value investing mindset but also contributes to greater tax efficiency by minimizing capital gains distributions.

The Expense Ratio & AUM: A Critical Look

While BUSA's investment philosophy and early performance are compelling, a crucial aspect for any ETF investor is its expense ratio. Actively managed funds typically come with higher fees than their passive counterparts, and BUSA is no exception. The Brandes U.S. Value ETF has an expense ratio of 0.60%. This figure is notably above the Large Value category average of 0.37%, making it 63% higher than its peers and earning it an 'F' grade for expense ratio from AAII.

This higher expense ratio is a double-edged sword. On one hand, it's the cost associated with Brandes' experienced management team and their rigorous, bottom-up research process, which aims to deliver alpha. The argument for active management often hinges on the belief that superior stock selection can more than offset these higher fees. However, as many investors know, high annual expense ratios can significantly erode long-term returns, making it harder for a fund to outperform its benchmark after costs.

Another factor to consider is the fund's assets under management (AUM). With $304.0 million in total assets, BUSA is below the $5 billion average for the Large Value category. Generally, lower AUM can translate to higher average expense ratios, as fixed operating costs are spread across a smaller asset base. While larger assets are often desired for liquidity and scale, for some active strategies, particularly those involving smaller-cap investing, excessive growth in AUM can sometimes hinder a manager's ability to fully implement their desired strategy. However, given BUSA's large-cap mandate, this is less of a concern.

The fund's trailing yield is 1.52% (API data) or 1.47% (AAII data), which is below the category average of 1.84%. BUSA distributes income quarterly and capital gains annually. While income generation is not its primary objective, this dividend yield provides a modest income stream for investors. Ultimately, investors must weigh the potential for alpha generation from Brandes' proven value discipline against the drag of a higher expense ratio and decide if the active management premium is worth the cost.

Investor Implications and Risks

For investors considering BUSA, the narrative is one of potential alpha driven by a time-tested, contrarian value approach, but with inherent trade-offs. The ETF's early outperformance against its Large Value category peers is a strong indicator that Brandes' disciplined stock selection is working. This could be particularly attractive for those who believe value stocks are poised for continued leadership, especially as the market potentially broadens beyond the "Magnificent Seven" growth giants.

However, BUSA is a relatively new fund, having launched in October 2023. While its management team brings decades of experience from Brandes' broader strategies, the ETF itself lacks a long-term track record through various market cycles. This limited operating history means investors are relying more on the firm's established philosophy than on the ETF's specific performance data over extended periods.

The higher expense ratio of 0.60% is a significant consideration. While active management aims to justify this cost through superior returns, it's a hurdle that BUSA must consistently clear. Investors should monitor whether the fund's net returns (after fees) continue to outpace its category and benchmark over the long run. Furthermore, as an actively managed fund, BUSA is exposed to issuer-specific risks and the potential for "value traps," where a seemingly cheap stock remains undervalued due to underlying business issues.

Ultimately, BUSA represents a compelling option for investors seeking an actively managed, large-cap U.S. value exposure with a strong philosophical underpinning. Its early performance is encouraging, but a long-term commitment will require patience and conviction in Brandes' ability to consistently identify mispriced securities and deliver alpha, despite the higher cost of admission.

The Brandes U.S. Value ETF offers a distinct value proposition in a market hungry for differentiated strategies. Its disciplined approach and early outperformance suggest it could be a valuable addition to a diversified portfolio, but investors must remain mindful of its higher expense structure and relatively short track record. For those with a long-term horizon and an appetite for active management, BUSA warrants close consideration.

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