U.S. equities narratives take up plenty of oxygen for U.S. investors. The big stories about the Magnificent Seven and the Fed rightfully draw a lot of investor attention. That being said, such a U.S.-centric media landscape sometimes obfuscates the role of investing abroad. U.S. investors may miss out on really exciting investment opportunities in areas like emerging markets, with one active emerging markets ETF standing out.
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That active emerging markets ETF, the WisdomTree Emerging Markets Multifactor Fund (EMMF), can really appeal. First off, consider its approach. The strategy invests actively, yes. However, it does so on top of a rules-based approach to emerging markets, using a quant model. That model relies on a variety of factors like quality, value, and momentum. Its active approach lets its managers adapt on top of those rules.
Charging 48 basis points (bps), the strategy has returned 25.2% over one year. That has more than doubled the performance of its ETF Database Category and FactSet Segment averages.
Why, then, look to emerging markets in the first place? Emerging markets offer some intriguing upside, on top of being a diversifier against the U.S. economy. Global supply chain rearrangement has boosted emerging markets like India, for example. What’s more, emerging markets have largely gotten through their inflation and central bank cycles.
EMMF also stands out because its active approach lets its managers adapt to certain macro storylines, like China’s downturn. China’s issues have posed some challenges for foreign investing given how big a role it plays in global equities indexes. The active emerging markets ETF can mitigate that, whereas passive global ETFs lack the same options to do so.
Taken together, EMMF represents one strong option to get diversification into a U.S.-heavy portfolio. Emerging markets’ upside in an active ETF, then, may appeal to investors looking to get into active ETFs and to get some non-U.S. performance.
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