Rarely do we see large inflows in both iShares MSCI Emerging Markets (NYSEArca: EEM) and Vanguard Emerging Markets (NYSEArca: VWO) simultaneously, as the trend in the exchange traded funds for at least the past year has tended to involve assets bleeding over from EEM and into VWO perhaps as “swaps.”
In fact, there has been much made about the fact that VWO has surpassed EEM in total assets under management, garnering over $47 billion currently versus EEM’s $35 billion. Additionally, VWO now has more than a five year live track record to its credit as well as a notably lower expense ratio than EEM (22 basis points versus 60 basis points).
Nevertheless, the trend in recent days has been large inflows via creations in both emerging markets focused ETFs, which both track the MSCI Emerging Markets index, with collectively nearly $7 billion entering these two ETFs.
The space itself has been one of rapid growth in ETF/index innovation in recent years (with 50 ETF/ETNs currently classified as “emerging markets”) and has turned out some strong performances. For instance, the best performer in the emerging markets space year to date is EGShares Emerging Markets Consumer (NYSEArca: ECON), which is down 2.02%, and invests in 30 leading emerging market companies that are in the consumer goods and consumer services sectors.
Other top performing non leveraged long funds in the space that have at least one year of live performance history in sequence are PowerShares DWA Emerging Markets Technical Leaders (NYSEArca: PIE) which is down 11.33%, WisdomTree Emerging Markets High Yielding Equity (NYSEArca: DEM) down 11.83%, iShares S&P Emerging Markets Infrastructure (NasdaqGM: EMIF) down 11.89%, and SPDR S&P BRIC 40 (NYSEArca: BIK) down 13.45%.
Emerging markets are clearly weighted heavily towards China, and we have mentioned in recent recaps that China has lagged other countries and markets significantly year to date. For a reference point, iShares FTSE China 25 (NYSEArca: FXI) is down 16.30% year to date versus EEM down 14.33 year to date and the S&P 500 has lost 0.33%.
Thus, inflows in emerging markets ETFs reflect investors perhaps betting on a change of fortunes in China in the months and the year ahead.
EGShares Emerging Markets Consumer
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