The iShares MSCI Emerging Markets (NYSEArca: EEM) has been the best-selling ETF since Vanguard said it would change benchmarks at a lower-fee competitor tracking the same index.

EEM, which is managed by BlackRock (NYSE: BLK), has gathered nearly $1.3 billion of inflows since Oct. 2, when Vanguard announced it was switching indices at several of its ETFs, including Vanguard MSCI Emerging Markets (NYSEArca: VWO). [Vanguard Changing Indices for Several ETFs]

VWO will move from the MSCI Emerging Markets Index to the FTSE Emerging Index. VWO has an expense ratio of 0.2%.

EEM, the iShares ETF, charges fees of 0.67%.

The cheaper Vanguard emerging market fund has been outselling its rival iShares ETF in recent years. VWO has total assets of $57.9 billion while EEM has $38.1 billion, according to investment researcher Morningstar.

However, the recent inflows to EEM in the wake of the Vanguard benchmark swap announcement are notable. The flows suggest that some institutional investors benchmarked to MSCI indices may be moving into the iShares fund, although other factors such as year-end tax swaps and asset class rotation may be at work here. It’s difficult to pin money flows in ETFs on a single factor.

During BlackRock’s recent third-quarter earnings call, CEO Larry Fink hinted the asset manager was seeing investors move into its iShares funds that track MSCI indices after Vanguard decided to drop the benchmark provider from its ETFs.

“We are seeing flows into our existing products, because of the changes of index providers with our competitor,” Fink said.

“The one thing that people are failing to look at … is institutions by and large want to use the MSCI index,” he added. [The Phony ETF Fee War?]

Earlier this week, BlackRock launched iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG).

The new ETF has an expense ratio of 0.18% and its underlying portfolio will be similar to EEM. [BlackRock Lists Four ‘Core’ iShares ETFs]

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