Higher-for-longer interest rates and ongoing geopolitical friction make navigating emerging markets (EM) and capturing their growth potential a trying task. This is where investors can shift the onus of EM investing to experienced portfolio managers, with an active fund such as the Fidelity Fundamental Emerging Markets ETF (FFEM).
To capture the opportunity set available in EM, investors must move past the constraints of passive indexes. Active management can help mitigate country and structural risks, thanks to its flexibility. To that note, FFEM provides a sophisticated, active solution to navigate volatile geographies.
The Active Structural Advantage
Traditional passive EM index templates typically build portfolios based on market capitalizations. This mechanical methodology may create massive country and sector concentrations that could expose investors to undue risk.
FFEM circumvents this with its actively managed mandate. The fund relies on Fidelity’s extensive fundamental equity research team, which can locate opportunities in EM equities based on comprehensive micro and macro factors. This flexibility allows the fund to identify underappreciated companies with earnings growth potential while actively mitigating macro vulnerabilities.
Navigating Growth Catalysts
The opportunity set targeted by FFEM centers around secular global development, particularly in the technology sector. The fund’s active positioning exposes investors to the massive corporate capital expenditure pouring into global semiconductor logic and algorithmic networks that will support AI. That said, key institutional holdings include global manufacturing leaders like Taiwan Semiconductor Manufacturing Co., Samsung Electronics, and SK Hynix. This deliberate concentration gives investors unfiltered exposure to the engines driving global technology, the buildout of AI infrastructure, and consumer hardware.
FFEM’s flexible fundamental strategy transforms standard international equity exposure from a rigid index placeholder to a nimble, active alpha engine. It’s ideal for investors seeking pure fundamental exposure to the world’s most dynamic economic zones with potential growth opportunities.
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Fidelity Investments® is an independent company unaffiliated with VettaFi LLC (“VettaFi”). These articles do not form any kind of legal partnership, agency affiliation, or similar relationship between VettaFi and Fidelity Investments, nor is such a relationship created or implied by the articles herein. VettaFi LLC is the author and owner of these articles.
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