International equities have stood out in an uncertain 2025, providing diversification and a big boost to portfolios amid tariff uncertainty. That said, not all equities strategies are created equal. A cheap, passive international equities ETF has its merits, of course, but could have some important weaknesses to consider. Active international equities ETFs, by contrast, offer some notable advantages.
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A recent piece by T. Rowe Price analysts and leaders explored the important ways in which active can outdo passive international equities. Perhaps most important may be passive funds’ overreliance on potentially questionable international equities indexes.
International Equities: Passive vs. Active
T. Rowe Price investment specialists Ryan Gemmell and Brian Navin, as well as head of ETF specialists Christopher Murphy, pointed to benchmark quality as a potential concern for passive international equities ETFs.
The trio compared how the S&P 500’s requirement for “financial viability” from firms contrasts with international equities indexes. Indexes like the MSCI EAFE index had a higher percentage of reported negative earnings over a five year (2019 to 2024) period than the S&P 500, they found. The inclusion of lower quality firms could pose a risk.
Active management, by contrast, can screen out those firms better thanks to fundamental research and tight managerial scrutiny. What’s more, international markets provide another big challenge; namely, their general uncertainty. Where the S&P 500 “operates within a single monetary policy regime, fiscal policy regime, and currency,” they write, international equities operate in numerous countries.
Looking at those advantages and disadvantages, then, one might want to consider a fund like the T. Rowe Price International Equity ETF (TOUS ). TOUS charges a competitive 50 basis point fee to actively invest in ex-U.S. developed market firms that meet its standards.
Whether in TOUS or another fund, active approaches can do well compared to passive in international equities. For those looking for an edge in a growing category, consider how active can help stand out vs. questionable, passive global equities indexes.
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