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How Active Management Assists With Emerging Markets Investing

BY | ETF Database
10:31 am ET 08/05/26 | 3 VIEWS
Emerging markets (EM) continue to attract investor attention after the asset class significantly outperformed U.S. and global stocks in 2025 and Q1 2026. Fueled by deglobalization, expanding artificial intelligence (AI) ecosystems, and powerful reform tailwinds, more investors are migrating to EM equities. State Street Global Advisors (SSGA) flow data highlights this growing momentum, showing that EM-focused ETFs have attracted an impressive $38.48 billion in inflows year-to-date.However, capturing these opportunities requires moving away from rigid, backward-looking passive indexes. Baron Emerging Markets Select ETF (BCEM), by contrast, offers an active, forward-looking approach to EM investing. See More: Finding High-Conviction Growth in Baron SMID cap ETF, BCSM “Emerging markets is a large and diverse asset class with more than 10,000 companies,” noted Michael Kass, portfolio manager of BCEM. “Each country reflects a distinct mix of economic, regulatory, cultural, and governmental factors, which means secular growth themes can play out very differently across regions.”Key Takeaways: Uses an active, forward-looking approach to invest in secular and structural growth opportunities before they are fully reflected in market prices. Employs a long-term, high-conviction approach that enables the management team to avoid reactive, short-term decisions during volatile markets and maintain the patience and discipline needed to capitalize on long-term growth opportunities. Holds meaningful positions in its highest-conviction investments while actively managing risks related to quality, liquidity, currency, and credit. A Forward-Looking FrameworkBCEM combines Baron Capital’s bottom-up, fundamental research approach with forward-looking theme identification to focus on high-impact growth opportunities. Rather than waiting for passive screens to react after valuations have already adjusted, this active mandate seeks to identify inflection points ahead of the broader market and invests in companies positioned to benefit from emerging tailwinds. Kass noted that anticipating these shifts is key to generating alpha. “This creates a compelling opportunity for active managers to identify investments earlier, position ahead of inflection points, and adapt as conditions evolve,” Kass said. “Anticipating these opportunities before valuations adjust—and capturing the associated earnings potential—requires a forward-looking active approach rather than a reactive one.”Mitigating Risk in Volatile RegimesActive management is equally important when navigating sudden spikes in geopolitical, policy, and currency volatility that are inherent in EM investing. To help mitigate these risks, BCEM anchors its portfolio in well-managed, entrepreneurial businesses, including top holdings such as Taiwan Semiconductor Manufacturing, Samsung Electronics, and SK Hynix. The ETF also employs a multi-faceted risk management approach designed to protect capital. By proactively monitoring credit cycles, global liquidity, and business fundamentals, BCEM is positioned to not only accommodate the nuances of EM exposure but also to capitalize on them. To learn more about Baron Capital’s full lineup of active ETFs, click here. For more news, information, and analysis, visit the Market Insights Content Hub.

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