Turn Geopolitical Risk Into Emerging Market Alpha in Active ETFs

Core Insights - Emerging market equities, including ex-U.S. stocks, have shown strong performance in 2023, providing significant upside outside of major tech stocks driven by AI [1] - Geopolitical risks have escalated, complicating foreign investments, with events like the Russian invasion of Ukraine and tariff wars creating layered challenges [1][2] - Active ETFs can leverage fundamental research to navigate geopolitical volatility, potentially outperforming passive funds in uncertain markets [3][4] Investment Strategies - Passive funds face challenges in low-information markets, as strict allocation rules can hinder performance during geopolitical events [2] - Active ETFs, such as the T. Rowe Price International Equity ETF (TOUS), utilize fundamental research to identify firms with strong cash flow and profitability, allowing for quicker adaptation to external shocks [4] - The flexibility of active ETFs positions them as a valuable addition to portfolios, especially in the face of geopolitical risks where passive funds may struggle [5]