As more and more investors look to diversify into international equities, it’s worth asking: Which ETFs can provide the best solutions? While broader international equities funds have done well, much of that performance came amid the spring drop-off in U.S. stocks. For those looking to diversify abroad, then, where to go next? Active emerging markets ETFs can provide that international performance even if international equities broadly don’t spike as they did earlier this year.
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Active emerging markets ETFs could be poised to outdo broad international equities for the rest of the year. Firstly, right now they cost less than developed international equities. That could give those firms more space to run in the right conditions.
Secondly, an active approach could build off of that cost landscape and find the strongest contenders in that cheaper space. Active emerging markets ETFs managers can lean on fundamental research to separate the wheat from the chaff abroad.
Finally, emerging markets offer younger companies that could be poised to take advantage of key global trends. Whether that’s in tech, for example, with e-commerce upstarts aplenty, or another area, emerging markets presents long-term appeal.
The Avantis Emerging Markets Value ETF (AVES ) presents an intriguing example. It charges a 36 basis point fee to actively invest in value-oriented emerging markets equities. The strategy emphasizes companies with lower price-to-book values, as well as higher profitability. Its managers assess the latter via metrics like cash flows, revenues, and shares outstanding, for example.
That has helped AVES outperform its ETF Database Category and FactSet Segment averages over three months, per ETF Database. The fund returned 13.5% in that time, beating its averages’ returns of 10.5% and 11.8%, respectively.
Taken together, active emerging markets ETFs could provide a strong option for investors to consider. Whether AVES or another fund, the space could be one to watch.
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