ETF Edge: International Investing Resurgence Driven by Geopolitics, Fundamentals, and Active Management

Global ETF Market Growth and International Interest

• 🚀 The ETF market has seen record-breaking growth, with over a thousand new ETFs launched in 2025, 83% of which were actively managed.
• 💡 Renewed interest in international markets is driven by factors like potential dollar debasement, AI, lower interest rates, shareholder-friendly policies, and a weakening dollar, encouraging diversification beyond US-centric portfolios.
• 📈 While US ETF flows remain strong, international markets are showing strong performance catch-up, with international outperforming the US by approximately 16% in the last 14 months.

Fundamental Drivers of International Outperformance

• 📊 The current outperformance in international markets is attributed to fundamental drivers rather than just a catch-up trade, especially considering a 10-year underperformance of nearly 60% for global markets.
• 🔑 The dominance of US "Mag 7" stocks has potentially choked off market cap dynamics, creating opportunities elsewhere.
• 💰 International investing is highlighted as a long-tail trade with US investors still being underweight, holding only 12-15% of global market cap compared to its 30-40% global share.
• 🌍 Key fundamental advantages for international markets include valuation attractiveness, significantly better dividend yields, and a resurgence in global growth.

Emerging Opportunities and Geographies

• 🇪🇺 Deregulation in Europe is seen as a more powerful trend than in the US, revitalizing previously underperforming economies and leading to strong performance in European banks.
• 🌏 Geopolitical shifts and a trend towards delobalization are encouraging the rest of the world to reposition, with new trade deals emerging between regions like India and the EU, and Canada and China.
• 💡 Specific geographies showing strong performance include Latin America (driven by commodities like gold and copper) and South Korea (driven by its significant role in high-bandwidth memory and the semiconductor sector).
• 🇨🇳 China's tech sector is also becoming more attractive as political pressure and corporate governance risks from its own government are perceived to have improved.

The Rise of Active Management in ETFs

• 📈 Active ETF flows in the US have surged, making up 32% of all US flows last year, with 80% of new ETFs launched being actively managed.
• 🌐 While traditional country or index ETFs have dominated international exposure, there is a growing trend of actively managed international funds being brought to market by providers like JP Morgan.
• 🎯 Active managers leverage technology and deep research benches to identify opportunities, avoid value traps, and capture alpha, particularly in international markets where passive indexes may be heavily weighted towards a few top names.
• 💰 JP Morgan's significant investment in research and technology supports their active ETF strategies, focusing on bottom-up analysis to uncover value exposure.

Future Trends and Hotspots

• 🤖 The AI story is broadening globally, benefiting international markets through tangential intersections like energy production, data centers, and improved chip manufacturing efficiencies.
• 🔋 Defense spending globally is increasing, presenting a significant trend, as is the utilities trade in modernized companies.
• 🇯🇵 Japan is highlighted for its corporate governance focus, free cash flow payouts, and efficiencies, leading to EPS growth.
• 🤝 The trend of deregulation is making international markets more interesting, with governments increasingly supporting