Once upon a time, iShares‘ popular emerging markets exchange traded fund (ETF) loomed large over all others. Lately, though, the flow of assets away from the iShares fund into its cheaper but similar Vanguard competitor has become a flood.

The two largest broad-based ETFs that track emerging markets are Vanguard Emerging Markets ETF (NYSEArca: VWO) and iShares MSCI Emerging Markets Index (NYSEArca: EEM).

They both track the same index, a rarity in the industry. Where the two funds really differ is when it comes to expense ratio. Matt Hougan for Index Universe reports that VWO charges 0.27%, while EEM charges 0.72%.

Investors fund flows have increasingly gravitated toward VWO: EEM has had $4.4 billion in net outflows, while VWO has had $8 billion net inflows in just three months. [How to Choose Emerging Market ETFs.]

iShares main argument is that EEM plays to a different audience than VWO, capturing institutional investors rather than the retail crowd. The other argument is that VWO is not as liquid as EEM, however, that is changing as VWO’s popularity grows.

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