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Emerging markets can come with a lot of growth potential. However, they also usually have more volatility than you might get with developed markets.
When investing in emerging markets, Matthews Asia's head of portfolio strategy David Dali said at Exchange 2023 that active management is key. “Our benchmarks tend to be blind to things like corporate governance and regulatory issues and geopolitics,” Dali told NYSE's Judy Shaw.
It's the first actively managed emerging market exchange-traded fund to exclude China.
Matthews Asia launched the Matthews Emerging Markets ex China Active ETF (NYSE Arca: MEMX) on the New York Stock Exchange today, adding to the firm's active ETF suite. MEMX allows investors to separate China from their core emerging markets allocations, thereby taking control over the level of China exposure in their portfolios.
Active management in emerging markets ETFs has led to significant outperformance this year. The Matthews Emerging Markets Equity Active ETF (MEM) has outperformed the benchmark because its managers have been able to tactically maneuver complex markets, capturing opportunities that lie outside of the purview of indexes.
While a global downdraft has affected nearly all segments of the market, emerging markets have been particularly impacted by a strong U.S. dollar. Thus, emerging markets rallied in mid-December as the U.S. dollar weakened against other major currencies amid growing concerns of the U.S.
Active emerging markets ETFs showed their strength this year, tactically adding new exposure to counter challenges in volatile markets and outperforming passive benchmarks.
Investors looking to access quality emerging markets exposure may want to consider the Matthews Emerging Markets Equity Active ETF (MEM).
As advisors look at options for tax-loss harvesting EM losses, ditching passive funds in favor of active ETFs may be worth consideration. With the end of the year approaching quickly, tax-loss harvesting is becoming a large focus among advisors and clients.
The outlook for emerging markets is bright, particularly for longer-term investors able to capitalize on the current discounted valuations. Investors with an intermediate- to longer-term perspective will benefit from allocating to a China-focused, Asia, or broad emerging markets ETF while these funds are still trading at a discount.
Many advisors avoid allocating to emerging markets over concerns the asset class will bring significant risk to a portfolio; however, this is a common misconception. Looking at the risk profile of emerging markets from an academic perspective, they are still volatile – albeit less than the asset class used to be.
There are many benefits of actively managed investing, including finding and capturing growth. Active funds have been able to counter the challenges of other markets by leveraging the strength of Vietnam, something passive funds have been powerless to do, according to Matthews Asia.
Screening for quality in emerging markets has become of paramount importance in recent years. Emerging markets have evolved tremendously, and while the potential for growth remains, the focus is more about seeking exposure to companies across all sorts of markets that are embedded for growth over the long term, according to Matthews Asia.
Electric vehicles (EV) are a lucrative investment theme, with emerging markets serving a critical function as both the end destination for the cars as well as the location for many companies involved in their manufacture. There are currently many companies involved in the production of EVs and many have viable offerings and ambitious roadmaps.
In an overall good month for markets, active emerging markets ETFs stood out in November for particularly strong performance. While this year has seen a downdraft in global markets that has affected nearly all regions and asset classes, global markets staged impressive rebounds during November.
As advisors look to tax-loss harvesting to enhance clients' overall investment returns, now is the ideal time to reallocate emerging markets exposure to an active ETF. With the end of the year approaching quickly, tax-loss harvesting is becoming a large focus among advisors and clients.
One of the most significant benefits of getting emerging markets exposure through an active ETF like the Matthews Emerging Markets Equity Active ETF (MEM) is the manager's ability to capture opportunities that the indexes miss.
As the outlook for Asia equities remains in construction, longer-term investors are in the ideal position to capitalize on the opportunities present in emerging markets. Investors with an intermediate- to longer-term perspective will benefit from allocating to an emerging market, Asia, or China ETF while these funds are still trading at a discount.
Investors who want a thematic and concentrated approach to their emerging markets exposure should consider the Matthews Asia Innovators Active ETF (MINV), which offers exposure to innovation in Asia. Now is an ideal time to add exposure as, beneath the global inflationary headwinds, Asian economies are resetting and innovation is growing.
This year has seen a downdraft in global markets that has affected nearly all regions and asset classes; however, for long-term investors, this unveils an opportunity in emerging markets. Many advisors are understandably standing by the sidelines, unsure of when to jump back into the game.