U.S. investors have so many options to choose from in the domestic equities landscape. From big tech to disruptive tech to utilities and healthcare companies, there’s something for all types of investors. Of course, those firms all share a big factor – they’re all in the same domestic economy. That’s where foreign equities come in, with the space offering some notable advantages to U.S. investors right now.
That’s not just a one-off observation, either, but a trend; asset managers at the ETF Exchange conference in Miami this year emphasized foreign and international equities as a space to watch. ETF leaders from firms including Matthews Asia, SS&C ALPS Advisors, BNY Mellon, and Columbia Threadneedle Investments all spoke with NYSE TV’s Floor Talk host Judy Shaw on the topic.
SS&C ALPS Advisors director of ETF portfolio management, trading, and research Andy Hicks spoke Shaw to about foreign investing as related to concentration risk in the S&P 500. To Hicks, passive investors face risks from overexposure to a big market jump from AI. With global central banks cutting rates this year, the firm is telling clients to start leaning abroad.
“We’re starting to tell clients to start peeling away some of that U.S. allocation and specifically going into international developed markets where you see very, very cheap valuations relative to U.S. markets,” Hicks said.
The firm offers ETFs like the ALPS International Sector Dividend Dogs ETF (IDOG). IDOG charges a 50 basis point (bps) fee to track its equal weight index that picks the five firms with the strongest dividend yields in each of the 10 GICS sectors.
Foreign Equities ETFs
IDOG has returned 12.9% over the last year per SS&C ALPS Advisors data. The strategy’s emphasis on dividends in foreign markets could help identify particularly appealing firms given that dividends tend to indicate a firm having a healthy outlook.
Shaw also sat down with BNY Mellon Investment Management head of ETF solutions Matt Camuso. To Camuso, economic uncertainty from geopolitical tensions, uncertain monetary policy, and a lack of market breadth point to ETFs like the firm’s BKCI. The BNY Mellon Concentrated International ETF (BKCI) actively invests per managers Walter Scott, a shop within BNY Mellon IM.
The ETF charges 80 bps to invest in firms that have sustained growth over different market cycles. It chooses 25 to 30 international, mostly growth names for its holdings. It has returned 3.4% over one year.
To China, or Not To China
Matthews Asia head of portfolio strategy David Dali also joined Shaw. Matthews Asia focuses on emerging markets in Asia, specifically. The shop aims to offer investors choice to build their foreign equities allocations.
Dali shared that investors may specifically want to check out a few ETFs like its Matthews Emerging Markets ex-China Active ETF (MEMX). MEMX has returned 17.4% over one year per Matthews Asia data, looking actively for firms with sustainable growth potential.
Finally, Shaw also spoke with Columbia Threadneedle Investments head of North America product and business intelligence Marc Zeiton. Zeitoun shared that the firm aims to identify points of concern in global benchmarks.
“A lot of investors don’t want to have so much exposure in China in their emerging markets allocation,” he said. “So we were lucky enough in 2015 to launch the first ex-China EM ETF which essentially provides that broad exposure but with no China exposure and perhaps a resultant increase in exposure to India and other developing nations.”
That refers to the Columbia EM Core ex-China ETF (XCEM). The strategy charges 16 bps to track its index, selecting 700 non-China emerging markets firms by market cap. The strategy has returned 14.4% over one year per Columbia Threadneedle Investments Data.
VettaFi LLC (“VettaFi”) is the index provider for IDOG, for which it receives an index licensing fee. However, IDOG is not issued, sponsored, endorsed, or sold by VettaFi, and VettaFi has no obligation or liability in connection with the issuance, administration, marketing, or trading of IDOG.
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