Emerging market exchange traded funds have doubled the performance of the S&P 500 so far this year with investors favoring developing countries over the U.S. and Europe. A weaker dollar has also provided a lift to emerging market ETFs.

Vanguard Emerging Markets (NYSEArca: VWO) and iShares MSCI Emerging Markets (NYSEArca: EEM) are both up 14.9% year to date, compared with a 7.4% gain for SPDR S&P 500 (NYSEArca: SPY). The emerging market ETFs track the same MSCI index. [Emerging Market ETFs Reemerging?]

VWO led all ETFs in January with net inflows of $3.2 billion, while EEM gathered $1.3 billion, the Financial Times reports. This after U.S. investors pulled $2.4 billion from emerging markets ETFs in 2011.

“Geoffrey Dennis, emerging markets strategist at Citigroup, says emerging markets could rise 25% to 30% over 2012,” the FT reports. “As well as highlighting attractive valuations, Dennis says falling inflation and lower interest rates will provide support for emerging markets in 2012.”

The two emerging market funds are the most popular ETFs this year. [Investors Tapping ETFs to Position for Higher Markets]

Subscribe to our free daily newsletters!
Please enter your email address to subscribe to ETF Trends' newsletters featuring latest news and educational events.