On this special episode of the "ETF of the Week†podcast, VettaFi's Head of Research, Todd Rosenbluth, reviewed some of his favorite ETF of the Week picks from 2025 with Chuck Jaffe of Money Life. Chuck Jaffe: One fund on point for today. The expert to talk about it. Welcome to the ETF of the Week! Where we get the latest take from Todd Rosenbluth, the head of research at VettaFi. And if you go to VettaFi.com, you're going to find all the tools you need to be a savvier, smarter ETF investor, and to get more ...

Core Insights - Investors are focusing on international ETFs for potential robust returns as 2025 comes to a close, with the T. Rowe Price International Equity ETF (TOUS) highlighted for its strong performance and potential in 2026 [1][5] Group 1: International Market Trends - The new tariff regime introduced in 2025 has positively impacted ex-U.S. equities, which are expected to continue performing well due to ongoing tariffs and a desire for diversification away from U.S. stocks amid A.I. concentration risks [2] - A declining dollar may also benefit foreign firms, making international investments more attractive [2] Group 2: Active vs. Passive ETF Strategies - Active international ETFs have gained traction, providing flexibility and a focus on fundamentals, which can lead to better performance compared to passive index-tracking ETFs [3] - Active strategies allow for adaptation to changing market conditions, offering an information advantage through dedicated research teams [3] Group 3: T. Rowe Price International Equity ETF (TOUS) - TOUS employs a bottom-up investment approach, focusing on companies with strong business models and high growth potential across various market capitalizations [4] - The ETF has achieved a year-to-date return of 32.5%, positioning it among the top active international equity ETFs, with momentum expected to carry into 2026 [5]

Core Insights - The strength of international equities ETFs is a significant market story for 2025, driven by investor interest in diversifying away from U.S. stocks and A.I.-driven concentration risks [1][2] - The performance of international equities ETFs in 2026 remains uncertain, but factors such as a weakening dollar and favorable foreign market conditions may support continued investor interest [3][4] Group 1: Market Dynamics - Investors are increasingly seeking foreign diversification to mitigate risks associated with the U.S. stock market, including a shifting yield curve and a declining dollar [2][3] - Many foreign markets have been more effective in managing inflation and are ahead of the U.S. in cutting cycles, making them attractive to U.S. investors [4] Group 2: Investment Strategies - The international equities space is diverse, with varying outcomes across different markets, suggesting that some markets may underperform while individual firms may thrive [5] - Active international equities ETFs, such as the T. Rowe Price International Equity ETF (TOUS), leverage fundamental research to identify investment opportunities, potentially outperforming passive ETFs in 2026 [6]

Core Insights - Active ETFs are gaining popularity among investors due to lower fee structures, which enhance the likelihood of fund managers outperforming passive benchmarks [1][2] - The average active ETF charges 0.63% in expense ratios, significantly lower than the 1.02% average for mutual funds, which is crucial for active managers aiming to achieve market returns minus fees [2] Fee Comparison - Active ETFs have an equal-weighted average expense ratio of 0.63%, while mutual funds average 1.02% [2] - When weighted by assets, active ETFs charge 0.40% compared to 0.58% for mutual funds, indicating a clear cost advantage for active ETFs [2] Performance Metrics - Only 21% of U.S. active funds managed to survive and outperform their average passive peers over the decade ending June 2025 [2] - The T. Rowe Price International Equity ETF (TOUS) exemplifies the cost advantage, with a 0.50% expense ratio and $815.4 million in flows year-to-date [3] Market Trends - Over 1,300 active ETFs have been launched since the beginning of 2024, reflecting a growing trend in the market [4] - Active ETFs provide greater tax efficiency through in-kind creations and redemptions, helping to avoid capital gains distributions that often affect mutual funds [4] Structural Advantages - Active ETFs benefit from lower trading costs and reduced impact from buying and selling by other investors, positioning them for better success rates against passive benchmarks compared to mutual funds [5]

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]