There's been a rush into international equities in 2025, and demand appears to be increasing. Portfolio managers at Lazard Asset Management are finding opportunities in several European and Asian banks, chipmakers and global gold miners. Investors this year have been diversifying their portfolios and rotating into international stocks as a hedge against volatility, geopolitical headwinds and risks tied to high U.S. valuations and a weaker dollar. The iShares MSCI ACWI ex US ETF has returned nearly 23% this year, more than double the 11% return in the SPDR S & P 500 ETF. CNBC spoke to a quantitative portfolio manager at Lazard Asset Management who has been active in international investing for nearly two decades. Paul Moghtader, managing director of the Lazard Advantage Team, is at the helm of the recently launched Lazard International Dynamic Equity ETF . The $422-million ETF, rated five stars at Morningstar, has an expense ratio of 0.40% and converted in May from the open-ended Lazard International Equity Advantage mutual fund. "Markets are increasingly volatile and risky. We're seeing risk injected from many different sources, and an international exposure is getting more attractive relative to U.S. for many reasons, including the valuation, more shareholder focus," Moghtader told CNBC. Four categories Moghtader said the firm looks at stocks through four lenses to find those that have both a growth and a value tilt: valuation, growth, quality and sentiment. Specific signals range from a stock's price-to-earnings ratio to how the company is investing for growth to the stability of its balance sheet. One filter Lazard recently incorporated into its screening process looks at the beta of a stock relative to GDP growth, which Moghtader said helps tag the risk or opportunity in an individual stock to the macroeconomic environment. "We have all these signals that tell us what stocks are attractive, and what we do is then combine this to build a portfolio that from a risk perspective ... things like country, industry, beta, market cap, all of those, we like to control relative to the benchmark," he said. Top holdings in the ETF, which trades under the ticker "IEQ," include Taiwan Semiconductor Manufacturing , BNP Paribas , Novartis , Tencent Holdings and Samsung Electronics . Given the fund's quantitative stock selection process, the ETF includes stocks that match themes Lazard's proprietary models find attractive, such as Canadian gold miners and European financials. Overweight European financials For example, the ETF is overweight French bank BNP, Japan Post Bank , Novartis and State Bank of India compared to its benchmark MSCI ACWI ex-US Index. London-based Barclays and France's Societe Generale are other attractive financials in the ETF, Moghtader said. BNP, the second-largest stock in the portfolio after Taiwan Semi, at a little more 2%, displays "very attractive growth in quality with reasonably attractive sentiment and value," Moghtader said. The bank has made notable investments to grow, he added, citing BNP's acquisition of AXA Investment Managers completed on June 30 that made the French bank the fifth-largest asset manager in Europe. BNP shares are up nearly 30% year to date in local currency terms. Other financials in the ETF have also outperformed. Shares of Societe General have almost doubled, rising 94% this year, while Barclays has jumped 34%. Japan Post is up 25. Societe General's robust gains were helped by strong second-quarter results, which saw a rebound in retail earnings that led the bank to raise its annual profit target. European banks have benefited from a rotation into undervalued financials, with bank stocks trading at lower valuations and paying above-average dividends. SCGLY 1Y mountain U.S.-listed shares of Societe General over the past year. Moghtader is also bullish on Canadian gold miners, which make up roughly 1% of the holdings in IEQ and include Barrick Mining , Kinross Gold and Torex Gold . Barrick shares in the U.S. have climbed 72% this year, while Kinross has soared 125%. The portfolio manager said Lazard has moved away from some software positions over the last month, reasoning that software development has become easier with the advent of artificial intelligence. The firm sold software stocks AppLovin , Gartner and Cadence Design Systems in August, and recently bought shares of Amphenol , Erickson , Western Digital and NetGear . Lazard as a whole managed roughly $231 billion in client assets as of April 30.
