September 3, 2025 • 16 mins
In this episode of Lead-Lag Live, I sit down with Brendan Ahern, Chief Investment Officer at KraneShares, to separate narrative from data on non-U.S. and emerging markets.
From index-construction quirks to the impact of a weaker dollar, Brendan lays out why headline EM returns can hide powerful growth — and how investors might be looking in the wrong places.
In this episode:
– Why headline EM returns can mask strong tech-led performance
– How stripping out banks/energy/SOEs changes the EM picture
– What a weaker dollar means for global rebalancing out of U.S. equities
– Where growth actually lives: names like TSMC, Alibaba, Tencent, Mercado Libre
– How to think about EM “growth factor” exposure alongside broader EM allocations
Lead-Lag Live brings you inside conversations with the financial thinkers who shape markets. Subscribe for interviews that go deeper than the noise.
#LeadLagLive #EmergingMarkets #Investing #GlobalEquities #USDollar
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Mark as Played
Transcript
Episode Transcript
Available transcripts are automatically generated. Complete accuracy is not guaranteed.
Speaker 1 (00:00):
What I think investors are missing is, if you
think about what's propelled USequities over the last 16 years
has been growth stocks, and thequestion then is is it that
non-US equities haven'tperformed well, or is the
definition of non-US equitiespotentially a bad one?
And I think that's our argumentat Cr shares.
Speaker 2 (00:32):
I'm your host, melanie Schaefer.
Welcome to Lead Lag Live Now.
Over the past decade and a half, us equities have dominated the
global investing conversation,but that doesn't mean non-US and
emerging markets have beenstanding still.
There's a persistent misnomerthat these markets haven't
delivered, and in today'senvironment, with a weaker
dollar and shifting growthdynamics, the story is far more
(00:55):
complex.
Joining me today is BrendanAhern, chief Investment Officer
at Crane Shares.
Brendan's here to help unpackthe reality of emerging markets
and, I guess, shed some light onwhere investors may be
overlooking some opportunities.
It's great to have you herewith me today, brendan.
Speaker 1 (01:13):
Thank you so much, Melanie.
Thank you for the opportunity.
Speaker 2 (01:16):
So, Brendan, to start out broad, why do you think the
narrative has taken hold thatnon-US and emerging market
equities have underperformed forthe last 16 years?
Speaker 1 (01:28):
Yeah, I think a little bit of this is over the
last 16 years, and you know,remember, you know 16 years is
64 quarters of opening yourbrokerage account statement or
meeting with your investmentcommittee or board of trustees
or directors and trying tofigure out why do we hold these
(01:49):
non-US equities that onlyunderperform that since the
global financial crisis low backin March of 2009, the S&P 500
is up almost 1200 percent andnon-US equities as represented
by the MSCI All-Country WorldEx-US Index are up basically one
(02:12):
third of that, almost 400percent.
So I think this constant USbull market has really caused
many investors to give up ondiversification, to give up on
asset allocation, because justthese non-US equities don't do
anything but underperform,though I would argue that that
(02:36):
argument misses a lot ofanecdotal evidence about
actually areas that haveoutperformed evidence about
actually areas that haveoutperformed.
Speaker 2 (02:48):
So, when we strip away headline comparisons, how
have emerging markets reallyperformed relative to the US
during that same period?
Speaker 1 (02:53):
So I mean MSCI emerging markets, so S&P, let's
call it, will round up to twelvehundred percent Non-US equities
, which obviously is EM.
Plus develop is up 400.
The MSCI emerging market indexis only up 310% over the same
time period.
So just arguably a disastrousresult.
(03:13):
But what I think investors aremissing is if you think about
what's propelled, us equitiesover the last 16 years has been
growth stocks and the questionthen is is it that non-US
equities haven't performed wellor is the definition of non-US
(03:33):
equities potentially a bad one?
And I think that's our argumentat Crane Shares.
And we're very well known forK-Web, our China internet ETF,
because it's this growth factorfor China.
So we don't hold any financials, no energy, no industrials, and
lo and behold, all of a suddenChina has got good performance.
(03:57):
You just got to pull out thesegrowth beta names.
And the exact same thesis worksin emerging markets that if you
strip out financials, energy,industrials, I mean some firms
will be like oh, if you removethe SOEs, it's not that they're
state-owned enterprises, it'sthat state-owned enterprises are
(04:20):
banks and oil stocks.
And if you just kick those outof your definition of EM, all of
a sudden you have goodperformance.
So the MSCI Emerging MarketTechnology Index has actually
beaten the S&P 500 over the last16 years.
The problem is tech was lessthan 10% of the index 16 years
(04:47):
ago.
So the other 90% of let's callit value stocks or
underperforming sectors way downthe performance.
So MSCI EM tech was up almost1500% over the last 16 years,
but the other 90% did so badly.
(05:09):
It brought that EM index returndown to 310%.
So that's, we kind of took thisK-Web thesis and created KEMQ,
which just again it just pullsout this growth factor, this
tech benchmark, from the broaderEM index and, lo and behold,
(05:33):
you've got good performance.
So you know, I love thesepeople who just say, oh yeah,
you know, em it stinks, butmaybe it's your definition of
emerging markets is what stinks.
Speaker 2 (05:43):
Yeah, and so, brendan , you've just sort of pointed
out the importance of separatingfactors inside emerging market
indices as well.
Can you explain what happenswhen we extract the growth
factor from emerging marketbenchmarks?
Speaker 1 (05:55):
Yeah, I mean the key is you got to go in and get it,
melanie, that you can't just buybroad-based EM because you're
going to get these slow,no-growth sectors that dominate
the benchmark.
So you got to go out andextract them.
And again, we did that withChina, with K-Web, the largest
(06:15):
China ETF in the United States,because we have this very
differentiated performancecharacteristic.
And we did this years ago withKMQ and I think investors would
be shocked that, according to Imean, this is Morningstar data
that year to date, kmq had a 769active and passive EM index
(06:46):
funds, em emerging market ETFs.
It's the first percentile andthat's after last year, 2024,.
Kmq was in the fifth percentile.
So it just shows when.
And what I think is key is thatthis is part of when EM comes
back, investors are going togravitate to these growth stocks
(07:10):
.
Do you want to own ICBC Bank orPetrobras or PetroChina?
I don't think so.
I think you want companies likeTaiwan, semi, alibaba, tencent.
So that's literally what we'vedone in KMQ and I'm so proud of
(07:31):
the results and still a smallfund because I just think this
story is really so out of sight,out of mind, because people
don't realize yeah, there's beengreat returns in emerging
markets and non-US stocks.
You just got to go out andextract this growth factor.
Speaker 2 (07:49):
So, brennan, yeah, I want to touch for a minute on
the currencies.
With the US dollar I guessshowing signs of weakness this
year, what changes are youseeing in the relative
performance of US versus non-USstocks?
Speaker 1 (08:02):
Yeah, I mean big picture.
Part of this incredible 16years of US equity
outperformance has been the hugetailwind US stocks get from the
dollar's appreciation.
So, from its April 2011 lows,the US dollar index hit a peak
(08:25):
of to call it like 50%, but it'scome down.
It's actually lost about 25%,about 14% off of its all-time
highs.
Now, there's a few factorsthere.
Melanie One is, if I'm a non-USinvestor, if I'm an investor in
(08:48):
Europe and I own US dollardenominated stocks because of
the euro's appreciation, I'mactually losing money.
S&p 500 might be up here to date.
I'm down, and the same is truefor yen, singapore dollar,
taiwanese dollar.
So I think you're seeing non-USinvestors are saying this
(09:12):
dollar weakness is hurting myreturns in US stocks and they're
starting to rebalance and theyown about $17 trillion of US
equities and I'm not sayingthat's going to zero.
I'm just saying, if it goesfrom 17 to 16 trillion, that
rebalance, where's the moneygoing to go?
(09:33):
Is it going to go into thesevalue names in Asia and Latin
America?
I don't think so.
I think it's going into growthnames like MercadoLibre, taiwan
Semi Tencent, alibaba, anyway.
So the dollar's weakness itmight not affect your behavior
as a US dollar investor.
(09:53):
But I think it's worthwhilethat you recognize how it's
affecting global investors'behavior, because there is a
global rebalancing.
I think away from US equitiesand it's not again, it's not
going to zero, I'm just sayingit is going to weigh on US
equities a little bit.
Speaker 2 (10:12):
Yeah, so that's what I wanted to ask is how important
do you think that currencyangle should be for investors
who are allocating to emergingmarkets and do you think there
will be an inflection point forthe US dollar?
Speaker 1 (10:25):
I think you know traveling to visit our global
institutional investors acrossthe globe, you know there are
concerns about the dollarweakness.
There are concerns about the USpolitical situation, this
terrible bipartisan politics.
There's concerns about the USbudget deficit and again, us
(10:50):
equities represent two thirds ofglobal equity market cap.
So it's just more of people aretaking some profits, I believe,
and reallocating that, and Ithink you're seeing that in the
performance of non-US equitiesthis year and I think
particularly in non-US equitygrowth stocks, particularly in
(11:13):
the EM space.
So I think it's something justyou know, as dollar investors,
you don't necessarily see andfeel that, but you know, talking
to foreign investors, it issomething that is of concern.
Speaker 2 (11:26):
Yeah, and so can we talk more specifically right now
about KEMQ.
How is it performing versus itsEM peers and what
differentiates it within thebroader EM ETF landscape?
Speaker 1 (11:38):
I think.
I think what's key to recognizeis it's this growth factor
relative to EM.
So so you know, knock on wood,we've had some really good
performance over the last twoyears, certainly when EM was
really out of favor value stocks, high dividend stocks held up
(12:00):
better.
So that's where I don'tnecessarily say to people you
shouldn't own broad-based EM,active or passive.
I'm just saying if you're goingto go in and reallocate, why
not go overweight these growthstocks that KEMQ owns?
That potentially it's a dialand it's a way to dial up your
(12:24):
growth.
And I think we see that in Asia, this real gross stock
outperformance, you know.
We see it in Latin America with, say, mercado Libre, you know
there's a whole host of examples.
So we're really constructive onthe space, can tell we're
(12:48):
constructive on the space.
I mean as a shareholder in KEMQI've been really happy relative
to my cheap EM beta where I mayhave paid nothing but I got no
performance for that.
Speaker 2 (12:56):
Yeah.
So finally, Brendan, forinvestors looking at CreenShares
lineup, or comparisons withinthe space, how should they think
about incorporating QEMQalongside your other
China-focused products, such asthe flagship K-Web?
Speaker 1 (13:10):
Yeah, I mean, I think first and foremost as a
boutique asset manager, this isall we do, so we're not trying
to be everything to everybody.
So A we produce a whole heck ofa lot of research on this space
, so we want to help investorsunderstand these companies, what
(13:30):
their opportunities set.
These aren't necessarilyhousehold names, necessarily
here in the US.
So one we want to earn thetrust of investors through our
research.
But then certainlyCranesharecom backslash K-E-M-Q,
you can get full transparencyon the holdings and this
(13:51):
performance.
Speaker 2 (13:52):
And where else you're active on social media, Brendan
.
Where can investors go to findout more about you and about the
funds outside of, maybe, thewebsite?
Speaker 1 (14:00):
Yeah, I mean certainly we do a whole host if
it's LinkedIn.
Yeah, I mean certainly we do awhole host If it's LinkedIn.
On X, twitter, tiktok, justunder the CraneShares handle,
and certainly for myself I'm atAhern underscore Brendan on X
and also available on Twitter.
I'm sorry on LinkedIn as well.
(14:21):
But yeah, certainly you know,at info at Cresharescom,
customer services job one, youknow we're always available 24-7
.
Speaker 2 (14:28):
Well, Brendan, thanks so much for joining me and
thanks to everyone for watching.
Be sure to like, share andsubscribe for more episodes of
Meat Leg Live.
See you next time.
Bye.
What I think investors are missing is, if you
think about what's propelled USequities over the last 16 years
has been growth stocks, and thequestion then is is it that
non-US equities haven'tperformed well, or is the
definition of non-US equitiespotentially a bad one?
And I think that's our argumentat Cr shares.
Speaker 2 (00:32):
I'm your host, melanie Schaefer.
Welcome to Lead Lag Live Now.
Over the past decade and a half, us equities have dominated the
global investing conversation,but that doesn't mean non-US and
emerging markets have beenstanding still.
There's a persistent misnomerthat these markets haven't
delivered, and in today'senvironment, with a weaker
dollar and shifting growthdynamics, the story is far more
(00:55):
complex.
Joining me today is BrendanAhern, chief Investment Officer
at Crane Shares.
Brendan's here to help unpackthe reality of emerging markets
and, I guess, shed some light onwhere investors may be
overlooking some opportunities.
It's great to have you herewith me today, brendan.
Speaker 1 (01:13):
Thank you so much, Melanie.
Thank you for the opportunity.
Speaker 2 (01:16):
So, Brendan, to start out broad, why do you think the
narrative has taken hold thatnon-US and emerging market
equities have underperformed forthe last 16 years?
Speaker 1 (01:28):
Yeah, I think a little bit of this is over the
last 16 years, and you know,remember, you know 16 years is
64 quarters of opening yourbrokerage account statement or
meeting with your investmentcommittee or board of trustees
or directors and trying tofigure out why do we hold these
(01:49):
non-US equities that onlyunderperform that since the
global financial crisis low backin March of 2009, the S&P 500
is up almost 1200 percent andnon-US equities as represented
by the MSCI All-Country WorldEx-US Index are up basically one
(02:12):
third of that, almost 400percent.
So I think this constant USbull market has really caused
many investors to give up ondiversification, to give up on
asset allocation, because justthese non-US equities don't do
anything but underperform,though I would argue that that
(02:36):
argument misses a lot ofanecdotal evidence about
actually areas that haveoutperformed evidence about
actually areas that haveoutperformed.
Speaker 2 (02:48):
So, when we strip away headline comparisons, how
have emerging markets reallyperformed relative to the US
during that same period?
Speaker 1 (02:53):
So I mean MSCI emerging markets, so S&P, let's
call it, will round up to twelvehundred percent Non-US equities
, which obviously is EM.
Plus develop is up 400.
The MSCI emerging market indexis only up 310% over the same
time period.
So just arguably a disastrousresult.
(03:13):
But what I think investors aremissing is if you think about
what's propelled, us equitiesover the last 16 years has been
growth stocks and the questionthen is is it that non-US
equities haven't performed wellor is the definition of non-US
(03:33):
equities potentially a bad one?
And I think that's our argumentat Crane Shares.
And we're very well known forK-Web, our China internet ETF,
because it's this growth factorfor China.
So we don't hold any financials, no energy, no industrials, and
lo and behold, all of a suddenChina has got good performance.
(03:57):
You just got to pull out thesegrowth beta names.
And the exact same thesis worksin emerging markets that if you
strip out financials, energy,industrials, I mean some firms
will be like oh, if you removethe SOEs, it's not that they're
state-owned enterprises, it'sthat state-owned enterprises are
(04:20):
banks and oil stocks.
And if you just kick those outof your definition of EM, all of
a sudden you have goodperformance.
So the MSCI Emerging MarketTechnology Index has actually
beaten the S&P 500 over the last16 years.
The problem is tech was lessthan 10% of the index 16 years
(04:47):
ago.
So the other 90% of let's callit value stocks or
underperforming sectors way downthe performance.
So MSCI EM tech was up almost1500% over the last 16 years,
but the other 90% did so badly.
(05:09):
It brought that EM index returndown to 310%.
So that's, we kind of took thisK-Web thesis and created KEMQ,
which just again it just pullsout this growth factor, this
tech benchmark, from the broaderEM index and, lo and behold,
(05:33):
you've got good performance.
So you know, I love thesepeople who just say, oh yeah,
you know, em it stinks, butmaybe it's your definition of
emerging markets is what stinks.
Speaker 2 (05:43):
Yeah, and so, brendan , you've just sort of pointed
out the importance of separatingfactors inside emerging market
indices as well.
Can you explain what happenswhen we extract the growth
factor from emerging marketbenchmarks?
Speaker 1 (05:55):
Yeah, I mean the key is you got to go in and get it,
melanie, that you can't just buybroad-based EM because you're
going to get these slow,no-growth sectors that dominate
the benchmark.
So you got to go out andextract them.
And again, we did that withChina, with K-Web, the largest
(06:15):
China ETF in the United States,because we have this very
differentiated performancecharacteristic.
And we did this years ago withKMQ and I think investors would
be shocked that, according to Imean, this is Morningstar data
that year to date, kmq had a 769active and passive EM index
(06:46):
funds, em emerging market ETFs.
It's the first percentile andthat's after last year, 2024,.
Kmq was in the fifth percentile.
So it just shows when.
And what I think is key is thatthis is part of when EM comes
back, investors are going togravitate to these growth stocks
(07:10):
.
Do you want to own ICBC Bank orPetrobras or PetroChina?
I don't think so.
I think you want companies likeTaiwan, semi, alibaba, tencent.
So that's literally what we'vedone in KMQ and I'm so proud of
(07:31):
the results and still a smallfund because I just think this
story is really so out of sight,out of mind, because people
don't realize yeah, there's beengreat returns in emerging
markets and non-US stocks.
You just got to go out andextract this growth factor.
Speaker 2 (07:49):
So, brennan, yeah, I want to touch for a minute on
the currencies.
With the US dollar I guessshowing signs of weakness this
year, what changes are youseeing in the relative
performance of US versus non-USstocks?
Speaker 1 (08:02):
Yeah, I mean big picture.
Part of this incredible 16years of US equity
outperformance has been the hugetailwind US stocks get from the
dollar's appreciation.
So, from its April 2011 lows,the US dollar index hit a peak
(08:25):
of to call it like 50%, but it'scome down.
It's actually lost about 25%,about 14% off of its all-time
highs.
Now, there's a few factorsthere.
Melanie One is, if I'm a non-USinvestor, if I'm an investor in
(08:48):
Europe and I own US dollardenominated stocks because of
the euro's appreciation, I'mactually losing money.
S&p 500 might be up here to date.
I'm down, and the same is truefor yen, singapore dollar,
taiwanese dollar.
So I think you're seeing non-USinvestors are saying this
(09:12):
dollar weakness is hurting myreturns in US stocks and they're
starting to rebalance and theyown about $17 trillion of US
equities and I'm not sayingthat's going to zero.
I'm just saying, if it goesfrom 17 to 16 trillion, that
rebalance, where's the moneygoing to go?
(09:33):
Is it going to go into thesevalue names in Asia and Latin
America?
I don't think so.
I think it's going into growthnames like MercadoLibre, taiwan
Semi Tencent, alibaba, anyway.
So the dollar's weakness itmight not affect your behavior
as a US dollar investor.
(09:53):
But I think it's worthwhilethat you recognize how it's
affecting global investors'behavior, because there is a
global rebalancing.
I think away from US equitiesand it's not again, it's not
going to zero, I'm just sayingit is going to weigh on US
equities a little bit.
Speaker 2 (10:12):
Yeah, so that's what I wanted to ask is how important
do you think that currencyangle should be for investors
who are allocating to emergingmarkets and do you think there
will be an inflection point forthe US dollar?
Speaker 1 (10:25):
I think you know traveling to visit our global
institutional investors acrossthe globe, you know there are
concerns about the dollarweakness.
There are concerns about the USpolitical situation, this
terrible bipartisan politics.
There's concerns about the USbudget deficit and again, us
(10:50):
equities represent two thirds ofglobal equity market cap.
So it's just more of people aretaking some profits, I believe,
and reallocating that, and Ithink you're seeing that in the
performance of non-US equitiesthis year and I think
particularly in non-US equitygrowth stocks, particularly in
(11:13):
the EM space.
So I think it's something justyou know, as dollar investors,
you don't necessarily see andfeel that, but you know, talking
to foreign investors, it issomething that is of concern.
Speaker 2 (11:26):
Yeah, and so can we talk more specifically right now
about KEMQ.
How is it performing versus itsEM peers and what
differentiates it within thebroader EM ETF landscape?
Speaker 1 (11:38):
I think.
I think what's key to recognizeis it's this growth factor
relative to EM.
So so you know, knock on wood,we've had some really good
performance over the last twoyears, certainly when EM was
really out of favor value stocks, high dividend stocks held up
(12:00):
better.
So that's where I don'tnecessarily say to people you
shouldn't own broad-based EM,active or passive.
I'm just saying if you're goingto go in and reallocate, why
not go overweight these growthstocks that KEMQ owns?
That potentially it's a dialand it's a way to dial up your
(12:24):
growth.
And I think we see that in Asia, this real gross stock
outperformance, you know.
We see it in Latin America with, say, mercado Libre, you know
there's a whole host of examples.
So we're really constructive onthe space, can tell we're
(12:48):
constructive on the space.
I mean as a shareholder in KEMQI've been really happy relative
to my cheap EM beta where I mayhave paid nothing but I got no
performance for that.
Speaker 2 (12:56):
Yeah.
So finally, Brendan, forinvestors looking at CreenShares
lineup, or comparisons withinthe space, how should they think
about incorporating QEMQalongside your other
China-focused products, such asthe flagship K-Web?
Speaker 1 (13:10):
Yeah, I mean, I think first and foremost as a
boutique asset manager, this isall we do, so we're not trying
to be everything to everybody.
So A we produce a whole heck ofa lot of research on this space
, so we want to help investorsunderstand these companies, what
(13:30):
their opportunities set.
These aren't necessarilyhousehold names, necessarily
here in the US.
So one we want to earn thetrust of investors through our
research.
But then certainlyCranesharecom backslash K-E-M-Q,
you can get full transparencyon the holdings and this
(13:51):
performance.
Speaker 2 (13:52):
And where else you're active on social media, Brendan
.
Where can investors go to findout more about you and about the
funds outside of, maybe, thewebsite?
Speaker 1 (14:00):
Yeah, I mean certainly we do a whole host if
it's LinkedIn.
Yeah, I mean certainly we do awhole host If it's LinkedIn.
On X, twitter, tiktok, justunder the CraneShares handle,
and certainly for myself I'm atAhern underscore Brendan on X
and also available on Twitter.
I'm sorry on LinkedIn as well.
(14:21):
But yeah, certainly you know,at info at Cresharescom,
customer services job one, youknow we're always available 24-7
.
Speaker 2 (14:28):
Well, Brendan, thanks so much for joining me and
thanks to everyone for watching.
Be sure to like, share andsubscribe for more episodes of
Meat Leg Live.
See you next time.
Bye.
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