Strive Asset Management has added an emerging markets ex-China strategy to its suite of ETFs that are free of politicization.
EM ex-China strategies help to mitigate country-specific and idiosyncratic risk factors in emerging market portfolios.
The Strive Emerging Markets EX-China ETF (STXE US) has been listed on NYSE Arca with an expense ratio of 0.32%.
The fund has come to market with $100 million in initial assets.
With China representing roughly one-third of typical emerging market benchmarks, STXE can help mitigate country-specific and idiosyncratic risk factors that are often found in typical emerging market portfolios.
The fund tracks the Bloomberg Emerging Market ex-China Large & Mid Cap Index which covers large and mid-cap stocks across 24 emerging market countries, excluding China. Constituents are weighted by float-adjusted market capitalization.
Stocks from India represent a quarter (24%) of the index weight with the next-largest country exposures being Taiwan (18%), South Korea (14%), Saudi Arabia (9%), and Brazil (7%).
Notable stock positions included Taiwan Semiconductor (7.3%), Samsung Electronics (4.4%), and Saudi Arabian Oil (2.3%).
STXE is priced similarly to existing emerging markets ex-China ETFs such as the $15 million WisdomTree Emerging Markets ex-China Fund (XC US), which also has an expense ratio of 0.32%; and the $3.3 billion iShares MSCI Emerging Markets ex-China ETF (EMXC US), which costs 0.25%.
Strive seeks to stand apart from its rivals, however, by appealing to investors who are dissatisfied with how environmental, social, and governance (ESG) issues have encroached into the investment landscape.
While all of Strive’s ETFs are passive index funds, the firm pursues an active corporate governance agenda, including voting proxy shares and proactively engaging with management teams and boards, to unlock value by mandating companies to focus on business excellence over any social or political agenda.
Specifically, Strive uses its voice and its vote to protest against ESG-related shareholder proposals which are seen as impeding the maximization of clients’ financial interests. Such proposals may relate to ‘racial equity audits’, overly zealous emission reduction plans, and executive compensation schemes tied to environmental and social goals.
According to Strive, its ‘profits over politics’ approach is very relevant in relation to the role China should play in investors’ portfolios. Strive notes that China’s autocratic regime, economic vulnerabilities, and military posture toward its neighbors, including Taiwan, have created meaningful risks for global investors; however, Strive believes that many large financial institutions are unable to adequately educate their clients about these risks due to conflicts of interest arising from these firms having asset management businesses located in China.
Vivek Ramaswamy, Executive Chairman and co-Founder of Strive, explained: “ESG-promoting asset managers are vocal about supposed investment risks relating to board diversity and climate change, yet they are conspicuously silent about one of the most proximal investment risks that all investors face: the behaviors of Communist China. It’s no mystery why: they have deep conflicts of interest in China that prevent them from being as vocal about these issues or from imposing the same ESG constraints onto Chinese companies as they do for US companies. Strive refuses to build an asset management business in China to avoid these conflicts of interest so that we can better serve our US clients as a vocal fiduciary advocating for excellence.”
Strive offers a further seven ETFs targeting various US equity segments including large-cap, small-cap, growth, value, high dividend, energy, and semiconductor stocks.