The attraction of new capital to international equity ETFs came despite ongoing market uncertainties. Tariffs, geopolitical tensions, and changing interest rate policy decisions in the United States might deter investors from venturing outside of domestic equities, but that hasn't been the case this year. Speaking of changing interest rate policy, the rate-cutting cycle in the U.S. is helping the flight to international equities. Further rate cuts by the U.S. Federal Reserve could sustain a move towards int ...

Core Viewpoint - The U.S. Federal Reserve's second rate cut of the year is expected to further weaken the U.S. dollar, which will benefit international equities in 2025 [1][2]. Group 1: Impact of Dollar Weakness - The declining dollar is favorable for non-U.S. equity returns, as highlighted by Thornburg Investment Management [2][3]. - A weaker dollar enhances the performance of international equities, as their returns are often tied to the strength of local currencies [3][4]. Group 2: Investment Strategies - Investors interested in international equities post-rate cut should consider active investment strategies, particularly through Thornburg's funds: Thornburg International Equity ETF (TXUE) and Thornburg International Growth Fund ETF (TXUG) [5][6]. - TXUE offers broad exposure to international equities, while TXUG focuses on growth, making it suitable for investors wary of high valuations in large-cap U.S. growth stocks [6]. Group 3: Risk Management - Thornburg's investment approach includes a risk mitigation process that considers currency hedging, especially during periods of uncertainty [4][7]. - The firm emphasizes buying at a price with a margin of safety, aiming to shield investments from political volatility [7].

Core Viewpoint - The current market environment suggests that international equities may offer better future returns compared to U.S. equities, which have been dominant for decades but may not align with underlying fundamentals [1][3][5]. Market Environment - The macroeconomic backdrop is shifting towards international equities due to cyclical market leadership, with the U.S. potentially losing its long-standing position [3][4]. - Factors such as tariffs, inflation, interest rate cuts, and a declining U.S. dollar are making international equities more attractive [4]. Earnings Growth - Earnings growth in regions like Europe and Japan is outpacing that of the U.S., indicating that U.S. equities may have reached a peak in performance relative to their fundamentals [5]. Investor Sentiment - A survey indicated that 52% of respondents have a 10%-20% allocation to international equities, with nearly 50% expecting continued outperformance from these markets [6][7]. Investment Strategy - Thornburg Investment Management employs a bottom-up approach to international investing, focusing on three pillars: seeking underappreciated opportunities, maintaining a resilient foundation, and ensuring execution capability [8][9]. - The firm manages $52 billion in assets and offers active ETFs, including the Thornburg International Equity ETF (TXUE) and Thornburg International Growth Fund ETF (TXUG), to navigate international markets [9].

Core Insights - The current market environment is characterized by geopolitical tensions, easing monetary policy, and high levels of cash reserves, creating uncertainty and potential investment opportunities [1][2][3] - Approximately $7 trillion in cash is currently sitting on the sidelines, representing one of the highest levels in decades, which presents a significant opportunity for active managers to attract capital [3] - Investors are increasingly considering reallocating funds into international equities, as the U.S. equity market is trading at a premium compared to international markets, indicating potential for substantial returns [5] Market Conditions - The easing monetary policy is expected to apply downward pressure on the dollar, which could enhance the attractiveness of international equities [4] - Many investors have been hesitant to participate in the markets due to lofty valuations, particularly in large tech stocks driven by AI themes [2] Investment Opportunities - Active management is essential when navigating international markets due to their unique risks and opportunities, including tariffs [5] - Thornburg's actively managed funds, such as the Thornburg International Equity ETF (TXUE) and Thornburg International Growth Fund ETF (TXUG), are positioned to capitalize on these opportunities [6]

Group 1 - The rise of new active ETFs is occurring amid an uncertain investing environment as 2025 approaches, with recent rate cuts prompting investors to reassess their portfolios, thereby supporting the case for active management in international exposure [1] - Geopolitical risks and inflation are significant concerns for the market, alongside the impact of tariffs on businesses, which will influence operational decisions [2] - U.S. investors are increasingly interested in international equities to diversify and reduce home country bias due to uncertainty in U.S. equities, which have been primarily driven by technology stocks capitalizing on the AI theme [3][4] Group 2 - Active management is essential for selecting ETFs for international exposure given the various dynamics affecting international markets, with specific funds like Thornburg International Equity ETF (TXUE) and Thornburg International Growth Fund ETF (TXUG) recommended for investors [5]