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.
Since MEM began trading on July 14 through December 13, the fund has returned 10.22%, while the MSCI Emerging Markets Index has declined -0.45% during the same period, each on a total return basis.
MEM returned 12.1% last month, beating the MSCI Emerging Markets Index by 26 basis points. Over a three-month period, MEM has increased by 5.14% compared to the benchmark index’s decline of -1.03%, according to YCharts.
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.
Leading to the fund’s outperformance is the ability for active management to access compelling opportunities in frontier markets or developed markets that relate heavily to emerging markets, serving to counteract some of the volatility and downdraft in emerging markets.
MEM, as of September 30, offers exposure to China/Hong Kong, India, Mexico, Brazil, Vietnam, South Korea, Taiwan, Singapore, Canada, Indonesia, Australia, the Philippines, the United States, the United Kingdom, France, Qatar, Poland, Argentina, Israel, Turkey, and Kazakhstan.
The active ETF holds 55 securities as of November 23. The top 10 holdings in MEM are Taiwan Semiconductor Manufacturing Co., Samsung Electronics Co., Tencent Holdings, First Quantum Minerals LT, HDFC Bank, FPT Corp., Woodside Energy Group Ltd., Prologis Property Mexico, Icici Bank, and Infosys.
As of September 30, the fund’s sector breakdown is as follows: financials (25.1%), information technologies (22.5%), materials (10.2%), consumer discretionary (9.8%), real estate (7.7%), energy (6.8%), industrials (6.0%), consumer staples (4.6%), communication services (3.5%), and healthcare (2.4%).
MEM charges 79 basis points.
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