For nearly two decades, the playbook for U.S. investors was simple: Buy domestic tech and enjoy the ride. However, the conversation has shifted toward a long-overdue resurgence of international investing. With U.S. equity concentration reaching historic levels — where the top ten stocks command 40% of the index — there’s a compelling case for diversifying abroad.
Sandra Testani, global head of ETF products and strategies at American Century Investments, and Todd Mathias, head of U.S. ETF product strategy and development at Franklin Templeton, discussed the international investment opportunity on a panel at Exchange. The session was moderated by Todd Sohn, chief ETF strategist at Strategas Asset Management.
The Valuation and Growth Gap in International
While international markets represent about 35% of global benchmarks, the average private client portfolio holds just 5%. Testani pointed out that while the U.S. is dominated by high P/E growth names, international markets offer a broader universe. Over 70% of investable equities exist outside the U.S., often trading at 20-year valuation lows.
Active vs. Passive: Avoiding the "Museum"
A key takeaway was the danger of market-cap weighting in international indexes. Sohn noted that blindly buying international benchmarks often leaves investors stuck in “museum” stocks — stagnant, old-economy European firms. Instead, the panel advocated for active or factor-based ETFs to capture structural growth in regions like India or the reflation story in Japan.
Managing the Volatility
The discussion also tackled the FX factor. While currency volatility can be a drag, Mathias noted that currency-hedged ETFs can strategically lower a portfolio’s overall risk profile. Ultimately, the panel’s message was clear: International investing isn’t just about chasing performance; it’s about buying “insurance before you need it.”
For international exposure that is fit for the current environment, American Century offers the American Century Quality Diversified International ETF (QINT ), the Avantis International Small Cap Equity ETF (AVDS ), and the Avantis Emerging Markets Equity ETF (AVEM ).
Franklin Templeton’s international lineup includes the Franklin International Dividend Booster Index ETF (XIDV ), Franklin International Core Dividend Tilt Index ETF (DIVI ) and the Franklin International Low Volatility High Dividend Index ETF (LVHI ).
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