In 2025, international equities are commanding unprecedented attention from investors looking to diversify and hedge against mounting risks in the U.S. market. This shift is not just a fleeting trend but a strategic recalibration driven by a combination of geopolitical tensions, elevated U.S. stock valuations, and a weakening dollar. The data speaks volumes: the iShares MSCI ACWI ex US ETF has surged nearly 23% year-to-date, more than doubling the 11% return of the SPDR S&P 500 ETF. This divergence signals a compelling opportunity for investors to rethink their portfolio allocations.
At the forefront of this movement is Lazard Asset Management, whose quantitative approach to international investing offers a blueprint for navigating these turbulent waters. Paul Moghtader, managing director of Lazard’s Advantage Team, steers the Lazard International Dynamic Equity ETF (ticker: IEQ), a fund that recently transitioned from a mutual fund to an ETF and now boasts $422 million in assets under management with a competitive 0.40% expense ratio. Rated five stars by Morningstar, IEQ exemplifies the power of combining growth and value through rigorous quantitative screening.
What sets Lazard’s approach apart is its multi-dimensional stock selection framework, which evaluates companies based on valuation, growth potential, quality, and market sentiment. A particularly innovative metric they’ve integrated is the beta relative to GDP growth, a signal that aligns stock risk and opportunity with broader macroeconomic trends. This nuanced lens allows Lazard to construct portfolios that balance sector, country, and market-cap exposures while maintaining risk controls relative to the benchmark.
IEQ’s top holdings illuminate where the firm sees value and growth converging internationally. Taiwan Semiconductor Manufacturing leads the pack, followed by European heavyweights like BNP Paribas and Novartis, along with Asian tech giants Tencent Holdings and Samsung Electronics. Notably, the ETF is overweight in European financials—a sector that has attracted investor rotation due to its undervaluation and attractive dividends. French bank BNP Paribas, for instance, has gained nearly 30% in local currency this year, buoyed by strategic acquisitions such as AXA Investment Managers, which catapulted BNP into the top five asset managers in Europe.
Other European banks like Societe Generale and Barclays have also delivered stellar returns, with Societe Generale nearly doubling its share price thanks to a retail earnings rebound and raised profit forecasts. This resurgence in European financials underscores a broader trend: investors are capitalizing on the relative cheapness and shareholder-friendly policies of banks outside the U.S., a stark contrast to the high valuations and volatility stateside.
Lazard’s interest in Canadian gold miners—Barrick Mining, Kinross Gold, and Torex Gold—further diversifies the portfolio’s thematic exposure. With gold miners like Kinross soaring over 125% this year, this segment provides a hedge against inflation and geopolitical uncertainty, reinforcing the defensive qualities of the fund.
Interestingly, Lazard has recently trimmed its exposure to software stocks, reflecting a strategic pivot. The firm’s rationale is that artificial intelligence is simplifying software development, potentially compressing margins and growth prospects in this sector. Instead, Lazard has shifted capital into industrial and hardware companies such as Amphenol, Erickson, Western Digital, and NetGear, signaling a preference for tangible tech infrastructure over software innovation at this juncture.
For investors and advisors, the takeaway is clear: the international equity landscape is ripe with opportunities that demand a sophisticated, data-driven approach. Blindly chasing U.S. tech or sticking to domestic stocks in a high-valuation environment could expose portfolios to unnecessary risk. Instead, embracing diversified international ETFs like Lazard’s IEQ, which integrates macroeconomic insights and quantitative rigor, can enhance returns while managing volatility.
Looking ahead, expect continued volatility in U.S. markets driven by interest rate uncertainties and geopolitical shifts. International equities, especially in undervalued sectors like European financials and commodity-linked equities, are poised to outperform. Advisors should consider increasing allocations to global ETFs with disciplined stock selection methodologies and remain agile to sector rotations influenced by technological and economic changes.
A recent report from Morningstar confirms that actively managed international funds with robust quantitative frameworks have outperformed passive counterparts by an average of 2.5% annually over the past three years—a trend likely to persist as global markets grow more complex.
In summary, 2025 is shaping up to be a pivotal year for international investing. The smart move? Look beyond U.S. borders with a keen eye on valuation, quality, and macroeconomic alignment. Lazard’s IEQ ETF exemplifies how to do this effectively, making it a must-watch vehicle for investors aiming to capitalize on global growth while mitigating domestic market risks.
Source: Global banks, gold miners are strong opportunities, Lazard manager says