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. While this might make sense for short-term investors, those 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.
“There’s still a lot of pent-up growth as those economies start to come out of COVID. We may feel like we’re done with COVID in the U.S. and the developed world, but other places aren’t quite there yet,” Cooper Abbott, CEO of Matthews Asia, said in an interview with VettaFi last month.
There is also an interesting currency overlay that could benefit a U.S.-dollar investor. Abbott said some of the opportunities that the firm is investigating right now are very compelling in terms of valuation and growth prospects.
While investors can get broader exposure from a passive ETF, an active fund can offer far more pronounced exposure to these opportunities.
Matthews Asia launched three active ETFs in July offering exposure to different segments of the emerging markets asset class. The lineup includes the Matthews Emerging Markets Equity Active ETF (MEM), the Matthews Asia Innovators Active ETF (MINV), and the Matthews China Active ETF (MCH).
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.
For investors who are unhappy with the overall shortcomings of an index ETF and want to be exposed to opportunities not only in Asia but also in countries like Brazil, MEM might be an ideal fit.
MINV, a high-conviction, concentrated equity portfolio, invests in innovative companies in Asia ex-Japan, capitalizing on the new economy and rising disposable income in the region. MINV is worth consideration for investors who want a more thematic and concentrated approach.
MCH is a high-conviction equity portfolio that seeks companies benefiting from China’s domestic consumption. MCH uses an all-cap fundamental GARP approach driven by proprietary research and combines long-term core holdings with more opportunistic ideas to provide consistency through cycles. MCH offers concentrated exposure to China but is more forward-thinking than indexes in terms of how it looks at very complex and large geography.
For more news, information, and strategy, visit the Emerging Markets Channel.