T. Rowe Price International Equity Research ETF (TIER)

The T. Rowe Price International Equity Research ETF (TIER) holds a diversified portfolio of stocks in developed markets (Europe, Japan, Australia) and emerging markets (Brazil, China, India, and others) outside the United States, managed by T. Rowe Price’s investment teams who conduct original research and analysis on each region.

TIER is an actively managed ETF that trades intraday but differs from a traditional passive index fund: managers make deliberate allocation decisions about how much of the portfolio to commit to each region, and they select individual stocks based on their conviction that those securities will outperform. The fund captures the economic growth and valuations across the non-U.S. world, filtered through the lens of a permanent investment team stationed across multiple time zones.

Developed markets — Europe, Japan, and Australia

The developed-market portion of TIER covers the mature economies with long corporate histories and transparent financial systems. Europe accounts for roughly 40-50% of the typical portfolio, with the largest exposures to the United Kingdom, Switzerland, Germany, and the Nordic countries. These are companies in pharmaceuticals (GlaxoSmithKline, Roche), consumer goods (Nestlé, Unilever), financial services (HSBC, Deutsche Börse), and industrial equipment (Siemens, ABB).

Japan is typically 15-25% of the fund’s assets. Japanese companies have undergone significant changes over the past decade: corporate governance reforms and aggressive monetary policy pushed valuations higher, and a generation of Japanese firms in autos (Toyota, Honda), electronics (Sony), and industrial manufacturing grew globally competitive. Japanese stocks historically offered lower valuations than U.S. or European peers with comparable quality, making them attractive to value-conscious international managers.

Australia and smaller developed markets (New Zealand, Canada, Scandinavia) round out this segment. These economies are commodity-sensitive and benefit from rising demand in Asia, and their equity markets often include financials (banks), mining companies, and energy firms that reflect their resource-based economies.

Emerging markets — growth and volatility

Emerging markets are the volatile, faster-growing portion of TIER. China is typically the largest emerging-market position, where T. Rowe Price gains exposure to e-commerce (Alibaba), technology (Tencent), industrial manufacturing, and financials. China’s equities offer high growth potential but come with regulatory risk and state intervention that developed markets do not present.

India is the second-largest emerging market in most portfolios, benefiting from rapid GDP growth, a young population, and a rising middle class. Indian stocks include IT services firms, banks, consumer companies, and industrials riding economic expansion.

Brazil, Mexico, and other Latin American markets add commodity exposure and consumer spending growth. Southeast Asia (Thailand, Indonesia, Philippines) rounds out the emerging-market universe. These regions offer higher growth than developed markets but also higher volatility, currency risk, and sometimes weaker accounting standards or corporate governance.

The key advantage of a diversified emerging-markets exposure through TIER rather than a single-country fund is that specific risks — a China recession, a policy shock in India, political change in Brazil — hit only part of the portfolio.

The research advantage and active management

T. Rowe Price employs equity analysts and portfolio managers across every major region. Rather than mechanically mirroring an index of international stocks, the team makes regional allocation calls (deciding how much to tilt toward Asia, Europe, or Brazil) and individual stock selections within each region based on original analysis.

This means TIER’s performance can diverge from a passive international index in either direction. If the team correctly identifies that European auto stocks will outperform and overweights them, the fund benefits. If they misjudge an emerging market’s economic cycle or a company’s competitive position, they underperform. The management fee (typically 0.4-0.5%) reflects this active research, and the fund’s long-term performance is partly determined by whether that research added value.

Currency exposure and hedging

International stocks carry an additional layer of risk beyond equity prices: currency exposure. When a U.S. investor buys shares in a German pharmaceutical company, the stock’s price fluctuates in euros, and the dollar value depends on the euro-dollar exchange rate as well. If the euro falls relative to the dollar, a stock that rose 5% in euro terms might be flat or negative in dollar terms for a U.S. investor.

TIER is typically unhedged, meaning the fund accepts this currency exposure as part of the return. The rationale is that currency moves often reflect real economic differences between countries — if the euro weakens, it is often because European growth is slowing, and European stocks may fall anyway. By not hedging, the fund keeps the natural relationship intact.

Diversification benefits and home-country bias

A U.S. investor with all their equity exposure in U.S. stocks misses the growth of international economies and can become overconcentrated. TIER provides exposure to sectors and companies that do not exist in significant size in the U.S. — international pharmaceutical research (Novartis, Roche), European luxury goods (LVMH, Hermès), Japanese trading companies, and Chinese technology that rivals U.S. firms.

International stocks also often trade at different valuation levels than U.S. peers. At times Europe or Japan offers cheaper multiples for the same earnings quality, and a global portfolio exploits that difference. Over 10+ year periods, diversification into international equities has often improved a U.S.-only portfolio’s risk-adjusted returns.

Risks and challenges

TIER carries multiple layers of risk. Equity risk is first — if global stock markets fall, TIER falls too. Currency risk is second — unfavorable currency moves against the dollar can drag on returns even if foreign stocks rise. Country risk is third, especially in emerging markets where political instability, capital controls, or economic shocks can damage returns.

Concentration risk also matters. Although TIER is diversified, emerging-market exposure to China is often 20-30% of the total, so Chinese policy shocks hit hard. Liquidity risk can appear in less-developed markets — some international stocks trade thinly, and in market stress, selling large positions becomes costly.

Finally, there is manager risk: the research team’s judgments might be wrong. TIER’s active management offers the possibility of outperformance but also the possibility of underperformance relative to a passive international index. Past performance does not guarantee future results.

How to research TIER

Investors should compare TIER against passive international-equity ETFs like the Vanguard FTSE Developed Markets Index Fund (VEA) or iShares MSCI Emerging Markets ETF (EEM) to see whether active management has historically added value. They should examine the fund’s regional weighting, country concentrations, and sector mix through the T. Rowe Price fact sheet and prospectus.

Important metrics include the fund’s tracking error (how much its return deviates from a benchmark), the portfolio turnover (how frequently holdings change), and the yield (whether international stocks are providing dividend income). Currency movements and economic cycles in major regions should inform any decision to add international exposure, as should the investor’s own time horizon and risk tolerance for volatility.

For someone seeking international diversification through an actively managed lens, TIER offers T. Rowe Price’s global research capability in ETF form, with intraday trading and transparency, but with the cost and manager-dependent risk that come with active management.