Vanguard MSCI Emerging Markets (NYSEArca: VWO) is the best-selling ETF this year by a wide margin but Vanguard is hoping an index change at the fund won’t diminish its popularity.
The emerging market ETF has gathered inflows of $11.5 billion year to date, according to IndexUniverse data.
Its main competitor, iShares MSCI Emerging Markets (NYSEArca: EEM), has seen $2.9 billion move in and is also among the top 10 for ETF inflows.
BlackRock, the ETF’s manager, has also made a bold move recently. The firm recently introduced iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG). [BlackRock Lists Four ‘Core’ iShares ETFs]
There are a lot of moving parts in this emerging market ETF showdown featuring Vanguard and BlackRock.
‘Battle for assets’
First, VWO and EEM currently track the same MSCI index. However, Vanguard plans to fully transition to a FTSE index sometime next year. [iShares Emerging Market ETF Sees Inflow After Vanguard Index Swap]
VWO is cheaper than its iShares rival with an expense ratio of 0.2% compared with 0.67% for EEM.
Yet the recently launched iShares Core MSCI Emerging Markets ETF (IEMG) charges fees of 0.18%.
“With an expense ratio of 0.67%, EEM lost a battle for assets to its Vanguard equivalent, but EEM is still popular with institutions that use the ETF for tactical strategies. In other words, there was no good reason for iShares to tinker with the $38.1 billion EEM, but there certainly is a good reason (investor assets) to introduce a cheaper rival to the Vanguard MSCI Emerging Markets ETF (VWO),” Benzinga reports.
“Cost is not the only noticeable difference between EEM and IEMG. The former is home to 832 stocks. The new fund is home to nearly 1,600,” it adds.
IEMG is part of BlackRock’s new iShares Core Series, which features 10 ETFs. The company cut fees on six existing funds and rebranded them, and launched four new ETFs, including IEMG.
Strengthening the core