Major asset management firms are launching a series of actively managed emerging market ETFs, marketing them as alternatives to benchmark indices increasingly dominated by AI-related stocks. Several institutions, including Pictet Asset Management, T. Rowe Price, and Baron Capital Group, have introduced funds this year that invest in companies such as commodity producers and technology suppliers. These firms argue such businesses are underrepresented in widely tracked indices. The launch of these new products signals a strategic shift away from previous passive investment strategies that closely followed the MSCI Emerging Markets Index. This index is now increasingly driven by a handful of tech stocks, mirroring a concentration trend seen in the U.S. stock market. "There is a vast universe of opportunity outside these indices," said Mark Boulton, senior investment manager for emerging market equities at Pictet. "If you invest in a passive fund, you could have as much as 40% of your assets concentrated in a few mega-cap tech stocks." Pictet launched the RISE emerging markets ETF in late April. While it remains uncertain whether these newly launched funds will outperform their peers, the trend reflects a broader shift in investor sentiment towards emerging markets. Data shows that all 11 emerging market ETFs launched this year are actively managed by portfolio managers rather than following an index-tracking strategy, indicating issuers are marketing them by promoting diversification. However, this approach also means these funds largely avoid the large tech stocks that have driven the recent surge in emerging markets. According to calculations, the MSCI Emerging Markets Index has delivered a 24% return this year, with five tech stocks—led by TSMC—averaging gains exceeding 70%. Actively managed ETFs are more expensive than their passive counterparts. SPIVA data shows that, over the long term, actively managed funds often deliver lower returns. For investors like Garrett Aird, Vice President of Investment Management and Research at Northwestern Mutual, cost is a critical issue. He acknowledges that increased index concentration means passive strategies cannot provide him with broad exposure to emerging markets. Nevertheless, he remains unconvinced by active investment strategies for now. "While a passive emerging markets investment strategy may not deliver what many investors expect, the solution to that problem is not automatically switching to a more expensive, actively managed fund," he said. However, investor interest in such active strategies is growing. BlackRock data indicates that among all U.S.-listed ETFs, approximately 90% of new inflows in the first quarter of this year went into actively managed funds. Although emerging markets have captured only a small portion of these flows, fund managers are betting that investors will increasingly seek diversification and uncover overlooked individual stocks in the future. "While you may really want exposure to chip stocks, you also have to carefully consider the level of concentration risk you have in that specific sector," said Todd Sohn, Chief ETF Strategist at Strategas Securities.