When it comes to sheer equities performance over the last 30 years, there’s no denying the United States compared to the rest of the world. However, that could be changing according to one hedge fund manager.
Moving forward, AQR Capital Management’s co-founder and CIO Cliff Asness is forecasting that international equities may outperform the U.S. in the long-term investment horizon. As such, investors can take advantage of low prices in international equities now as they present a potential value option as well as a portfolio diversification tool.
“In a recent article for The Journal, the reports say that Asness – who famously managed to net record returns as stocks fell in 2022 – made the case for US investors looking to international stocks to diversify their portfolios because they present solid relative value based on cyclically adjusted price-to-earnings (CAPE) ratios,” Hedgeweek reported, also noting that with “U.S. mid-cap stocks still trading near the record relative values to their international peers seen in 2021, Asness wrote that stocks from ‘countries selling at lower valuations should have a higher long-term expected return.'”
Get Active Exposure to International Equities
International equities can offer investors diversified exposure to countries that could be in different economic cycles compared to the United States. However, with a vast array of opportunities available, it can be daunting to build a portfolio of international equities from scratch.
That said, one fund to consider for an all-encompassing approach is the American Century Quality Diversified International ETF (QINT). Per its fund description, QINT seeks to capture the performance of large- and mid-capitalization companies outside the U.S. that possess attractive quality, growth, and valuation fundamentals. QINT follows the American Century Quality Diversified Intl Equity Index, which offers investors a wide array of diversification that focuses on quality.
More specifically, the index includes the stocks of companies based in developed economies outside the U.S. and companies based in the rising economies of Taiwan, South Korea, Hong Kong, and China. In essence, the fund includes a mix of developed markets for quality as well as emerging markets that offer more growth exposure. All in all, the fund includes 374 holdings as of July 31, which helps to avoid over-concentration and therefore minimize exposure risk.
Delving deeper into its holdings, the diversification lends itself to the fund’s sector exposure. The top four sectors invested, as of August 31, are industrials (16%), financials (15%), consumer discretionary (14%), and healthcare (13%).
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