For years, financial advisors have grappled with the challenge of justifying emerging-market (EM) allocations to clients. Underwhelming returns, persistent volatility, and a decade of U.S. equity dominance have often left advisors defending positions that offered little in the way of diversification or growth. Today, that conversation is changing—and fast. Enter: the Touchstone Sands Capital Emerging Markets ex-China Growth ETF (ticker: TEMX).
Designed to give investors targeted access to emerging markets while explicitly excluding China, TEMX aims to deliver a conviction-driven alternative to broad, passive EM strategies. The exchange-traded fund (ETF) is built around deep fundamental research and a long-term investment horizon, seeking to unlock alpha by focusing on high-growth businesses operating in fast-changing economies—without the geopolitical baggage.
In an interview with The Wealth Advisor’s Scott Martin, Brian Christiansen, Senior Portfolio Manager and Executive Managing Director at Sands Capital Management (which actively manages and sub-advises TEMX), breaks down the fund’s strategy, the rationale behind its China exclusion, and why now may be the most compelling moment in years to revisit emerging markets.
A Shift in Global Correlations Opens the Door
According to Christiansen, investor sentiment around international equities has shifted dramatically. “Until recently, many investors were ready to give up on emerging markets,” he says. “We’d often get the question, ‘Why bother?’” But that question is fading. Today, with global structural decoupling and new diversification benefits reemerging, clients are starting to reconsider. “There’s a lot of evidence to suggest that, going forward, [EM] could play that traditional diversifying role,” he explains. “The questions have shifted from ‘Why bother?’ to ‘I better get up to speed on this.’”
A return to form is crucial for advisors looking to round out portfolios amid increasing volatility and uncertain macroeconomic trends. With correlations between U.S. and non-U.S. equities drifting apart again, especially in regions with unique economic drivers, TEMX seeks to offer a focused way to capture that renewed diversification benefit without the baggage of broad EM exposure.
Why “ex-China” Matters
TEMX’s exclusion of China is no footnote. It’s the foundation of the fund’s identity—and a deliberate response to growing investor discomfort with Chinese geopolitical and regulatory risk. “Clearly, the tensions have increased between the two countries,” Christiansen notes, referring to the U.S.-China relationship. For those concerned about exposure to China, “having a vehicle where they can get our best ideas, ex-China, gives advisors more tools to allocate capital again to what we think is an exciting asset class but without some of the potential drawbacks of an allocation to China.”
The strategy is not just about risk avoidance. With its mature tech giants, centralized policy apparatus, and outsize impact on index performance, China increasingly behaves like a stand-alone category. TEMX is designed for allocators who want focused exposure to markets such as India, Brazil, Indonesia, and Saudi Arabia—without being tethered to China’s volatility. The ex-China position makes the fund a customizable building block, aiming to empower advisors to handle China exposure separately when appropriate.
Concentrated, Conviction-Weighted, and Bottom-Up
TEMX is not a broad-market play. Christiansen emphasizes that “simply buying a broad-based passive emerging-markets ETF is unlikely to be the best way to go.” Instead, TEMX holds approximately 25 to 45 stocks selected through bottom-up research. “We’re trying to provide a strategy that not only gives you a concentrated portfolio of what we view as high-conviction [companies] but allows you to select your spots from a geography and an underlying business perspective.”
This approach reflects Sands Capital’s long-standing philosophy of applying private equity–like rigor to public equity investing. “We’re taking these deep, fundamental business-focused research [steps],” Christiansen says. “Our aim is to own these businesses for five years or longer . . . very similar to how many people approach private markets.” The result is a high-conviction strategy designed to capture long-term compounding from sustainable earnings growth—not short-term market timing or factor tilts.
Six Criteria Define Every Holding
Sands Capital relies on a proprietary six-criteria framework to vet every potential investment. “The, dare I say, ‘secret sauce’ is the ability to apply [these criteria] in a disciplined way over many, many years,” Christiansen says. Each holding must meet all six standards:
- Sustainable above-average earnings growth,
- Leadership in a promising business space,
- Significant competitive advantages,
- Clear mission and value-added focus (governance),
- Financial strength, and
- Rational valuation.
The framework enables the portfolio team to steer clear of legacy-heavy sectors that dominate passive EM indexes—such as banks, telecoms, and utilities—and instead zero in on transformative, entrepreneurial companies. “GDP growth doesn’t always equate to earnings growth and stock returns,” Christiansen notes. Instead, the team looks for companies that they think can defy mean reversion and deliver compounding returns well beyond market expectations.
“Valuation has to be attractive relative to the growth prospects for that business over the next three to five years, and then ultimately have the possibility of generating what we’d call an attractive expected return over that five plus year holding period. So, we want strong fits with each one of those criteria,” he explains. By focusing their research on the right geographies, businesses, and industries—and then holding those companies long enough to realize their full value—the team believes “that’s going to be a much better outcome.”
Boots on the Ground Meets Global Vision
TEMX’s edge comes not just from research depth but also from research proximity. “There’s definitely some math involved, but a lot of it is a lot of boots on the ground,” Christiansen explains. The investment team travels extensively, meeting with suppliers, competitors, customers, and local market experts to validate investment theses.
Such localized research complements Sands Capital’s broader understanding of such global innovation themes as digital transformation, biotechnology, and enterprise software. “We get to localize those trends through extensive on-the-ground research in these emerging markets,” he notes. That blend of macro-level trend identification and granular, company-level validation is rare in EM-focused products—and it’s a key differentiator.
Digital Leapfrogging and Middle-Class Expansion
The types of companies TEMX targets tend to operate at the convergence of structural economic change and disruption. Christiansen highlights two major secular forces driving the current opportunity set: the rapid expansion of the emerging-market middle class and the direct adoption of more advanced technologies underway in many economies.
“One of the things we talk about is that when there’s an intersection of change in an economy with innovation, that intersection often creates a lot of opportunities for a company to benefit from at those choke points,” he says.
Emerging markets are undergoing a seismic shift in consumer behavior, driven by rising incomes, increased digital connectivity, and changing expectations around services and access.
“We expect over a billion emerging-markets consumers to enter the middle class over the next decade,” Christiansen notes.
That demand shift, he adds, is fueling S-curve inflections in consumption, financial services, and digital infrastructure. In countries with large unbanked populations—a global demographic of some 1 billion adults, he notes—new technologies are transforming financial inclusion. “Most of those [unbanked] are in emerging markets, and for many, their first time interacting substantially with a financial institution is going to be over the internet on a mobile phone and not in a bank branch.” That dynamic opens a powerful investment window: by leapfrogging legacy systems, companies can grow faster, reach wider, and scale more efficiently.
Rather than waiting for traditional banking systems to mature, these countries are bypassing traditional infrastructure entirely—creating fertile ground for fintech and digital platforms to scale rapidly. It’s an economic transformation happening in real time, and TEMX is designed to capture its benefits.
Structural Reform Unlocks New Growth Engines
Beyond consumer behavior and tech adoption, TEMX also looks to capitalize on tangible reforms in physical infrastructure and governance. India, for example, is investing aggressively in highways, ports, and airports—an echo of the U.S. infrastructure boom of the Eisenhower era. “It helps lower the cost of delivering goods across the country, connect communities, and build commercial and residential real estate opportunities,” Christiansen says. “Those are the types of things that create opportunity and change—and change at the intersection of innovation in a great business is often where we find some of our best ideas.”
Such foundational upgrades improve the ease of doing business and can accelerate the development of domestic industries. TEMX doesn’t just seek companies riding those waves—it targets businesses creating them.
Founders Who Know Their Markets
Another key element of the TEMX philosophy is backing visionary local founders who understand both global best practices and local consumer behavior. “Many of these founders have been great students of the innovation that has happened in the U.S. and other developed markets. Many of them went to their MBA programs or worked in global multinationals,” Christiansen explains. “They’ve learned some of the best practices that have happened globally, the innovations that are happening globally. They know their home markets very, very well, and they’ve found ways to tweak those innovations to be even more conducive in their home countries.” This localized disruption creates businesses that are not just fast-growing but deeply relevant to their consumers.
“And that’s truly special to watch,” Christiansen adds. “It’s transformational. It’s providing the goods and services that consumers need, it’s creating jobs, and over the long term, it’s creating that earning stream that we think is going to generate alpha creation.”
Backing strong management teams has long been a hallmark of private equity investing. TEMX brings that same discipline into the public markets, supporting entrepreneurs who are shaping the next generation of economic growth in their home countries.
The Opportunity Ahead
TEMX is not just another emerging-market ETF. It’s a tool for advisors seeking targeted exposure to high-quality businesses in some of the world’s fastest-changing economies—without the drag of Chinese geopolitical risk or the weight of passive indexes bloated with financials and state-owned enterprises.
For advisors looking to enhance global diversification, tap into transformative secular trends, and offer clients a more compelling growth story than many traditional EM vehicles might deliver, TEMX is worth serious consideration.
Christiansen believes the timing couldn’t be better. “I’m really excited about this portfolio and the wealth creation opportunities when we’re looking out over the next decade,” he says. In a market increasingly hungry for differentiation, that’s a message that advisors—and their clients—are ready to hear.
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Additional Resources
- Contact Touchstone Investments
- Contact Sands Capital Management
- TEMX Fact Sheet
- TEMX Summary Prospectus
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Disclosures
Investing involves risk, principal loss is possible.
TEMX Risk:
The Fund invests in equities which are subject to market volatility and loss. The Fund invests in stocks of large-cap companies which may be unable to respond quickly to new competitive challenges. The Fund invests in stocks of small- and mid-cap companies, which may be subject to more erratic market movements than stocks of larger, more established companies. The Fund invests in preferred stocks which are relegated below bonds for payment should the issuer be liquidated. If interest rates rise, the fixed dividend on preferred stocks may be less attractive, causing their price to decline. The Fund may invest in equity-related securities to gain exposure to issuers in certain emerging or frontier market countries. These securities entail both counterparty risk and liquidity risk.
The Fund invests in foreign, emerging and frontier markets securities, and depositary receipts, such as American Depositary Receipts, Global Depositary Receipts, and European Depositary Receipts, which carry the associated risks of economic and political instability, market liquidity, currency volatility and accounting standards that differ from those of U.S. markets and may offer less protection to investors. The risks associated with investing in foreign markets are magnified in emerging markets, and in frontier markets due to their smaller and less developed economies.The Fund invests in growth stocks which may be more volatile than investing in other stocks and may underperform when value investing is in favor.
Events in the U.S. and global financial markets, including actions taken to stimulate or stabilize economic growth may at times result in unusually high market volatility, which could negatively impact Fund performance and cause it to experience illiquidity, shareholder redemptions, or other potentially adverse effects. The sub-adviser considers ESG factors that it deems relevant or additive along with other material factors. The ESG criteria may cause the Fund to forgo opportunities to buy certain securities and/or gain exposure to certain industries, sectors, regions and countries. The Fund may be required to sell a security when it could be disadvantageous to do so.
The Fund may focus its investments in specific sectors and therefore is subject to the risk that adverse circumstances will have greater impact on the fund than on the fund that does not do so. Touchstone exchange-traded funds (ETFs) are actively managed and do not seek to replicate a specific index. ETFs are bought and sold through an exchange at the then current market price, not net asset value (NAV), and are not individually redeemed from the fund. Shares may trade at a premium or discount to their NAV when traded on an exchange. Brokerage commissions will reduce returns. There can be no guarantee that an active market for ETFs will develop or be maintained, or that the ETF’s listing will continue or remain unchanged.
Please consider the investment objectives, risks, charges and expenses of the ETF carefully before investing. The prospectus and the summary prospectus contain this and other information about the Fund. To obtain a prospectus or a summary prospectus, contact your financial professional or download and/or request one at TouchstoneInvestments.com/resources or call Touchstone at 833.368.7383. Please read the prospectus and/or summary prospectus carefully before investing.
Touchstone ETFs are distributed by Foreside Fund Services, LLC.
Wealth Advisor and Touchstone Investments are not affiliated. Wealth Advisor and Foreside Fund Services, LLC, are not affiliated.
