A notable advantage in getting emerging markets exposure through an active ETF is the portfolio managers’ ability to capitalize on opportunities that index funds miss.
The Matthews Emerging Markets Equity Active ETF (MEM ) has outperformed its benchmark index, the MSCI Emerging Markets Index, by a sizable margin since the fund’s inception in July.
MEM invests in emerging market companies with perceived sustainable growth potential, capitalizing on consumption and innovation trends. The fund utilizes an all-cap, company-first approach, which emphasizes fundamental research over top-down country or sector allocation.
Since inception (July 13 through November 11), MEM has returned 8.42% on a total return basis while the MSCI Emerging Markets Index has returned -2.66% on a total return basis during the same period, according to YCharts.
Over three months through November 11, MEM has declined -1.79% compared to the MSCI Emerging Markets Index’s decline of -7.56%, each on a total return basis, according to YCharts.
Both MEM and the MSCI Emerging Markets Index have demonstrated impressive returns in the past month, with MEM still leading by a decent margin. MEM has returned 11.51% and the index has returned 9.56% on a total basis over one month.
Managers of an active ETF can access opportunities in frontier markets that emerging markets indexes cannot. Indexes cannot consider opportunities that are outside of the countries listed as eligible for inclusion, even if the company is domiciled in a developed or frontier country but exports primarily to emerging markets countries.
The well-known MSCI Emerging Markets Index is restricted to constituents based in Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Russia, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey, and the United Arab Emirates.
MEM, as of September 30, offers exposure to China/Hong Kong, India, Mexico, Brazil, Vietnam, South Korea, Taiwan, Singapore, Canada, Indonesia, Australia, Philippines, United States, United Kingdom, France, Qatar, Poland, Argentina, Israel, Turkey, and Kazakhstan.
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