Political tensions power launch of ex-China emerging markets ETF

US-based fund manager Strive Asset Management has launched its eighth index fund this month: the Strive Emerging Markets Ex-China ETF (ticker STXE). STXE is a passively managed ETF that seeks exposure to large- and mid-capitalization equity securities across 24 emerging market economies, excluding China, offering investors exposure to emerging markets while minimising China-related risks.

Strive says it believes that China’s autocratic regime, economic vulnerabilities, and military posture towards its neighbours, including Taiwan, create meaningful risks for global investors. Strive also believes that other large environmental, social, and governance (ESG) promoting financial institutions with asset management businesses in China are unable to adequately educate US clients about these risks due to their conflicts of interests in China.

Institutional investor backs ETF with $100m

Strive is launching STXE with $100 million from a leading institutional investor. With the launch of STXE, Strive is expanding its product offerings to include international exposure to its clients. Strive says it will advance its “pro-excellence” agenda by mandating ex-U.S. companies to focus on excellence over political or social agendas, building on Strive’s approach to shareholder engagement and proxy voting in the U.S.

“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 behavior of Communist China,” notes Vivek Ramaswamy, Executive Chairman and Co-Founder of Strive. “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 U.S. companies. Strive refuses to build an asset management business in China to avoid these conflicts of interest so that we can better serve our U.S. clients as a vocal fiduciary advocating for excellence.”

With the launch of STXE, Strive will aim to offer investors the opportunity to invest internationally. It is launching STXE at a moment of escalating cross-straits tensions between the U.S., China, and Taiwan, not to mention the current series of alleged spy balloon incidents currently focusing minds at NORAD.

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Strive’s President, Anson Frericks, says he expects these tensions to worsen during the course of Xi Jinping’s unprecedented third term with a rising risk of conflict surrounding Taiwan in particular.

Strive Emerging Markets Ex-China ETF [NYSE:STXE], has an expense ratio of 0.32% and seeks to track the total return performance, before fees and expenses, of the Bloomberg Emerging Market ex China Large & Mid Cap Index. It tracks large and mid-capitalization equity securities across 24 emerging market economies, excluding China. The benchmark does not pursue any specific environmental, social, governance (ESG) objectives.