In terms of performance, the emerging market funds are barely positive for 2012 and trailing the S&P 500, although some investors are bullish on developing markets judging by VWO’s massive inflows. It’s not clear whether the buying reflects investors rotating from EEM into the lower-fee VWO.

Earlier this year, Vanguard cut VWO’s expense ratio by 2 basis points to 0.2%.

Year to date, EEM has gathered net inflows of $693 million, according to the ETF Industry Association.

In 2011, investors pulled $8.5 billion from EEM, while VWO recorded net inflows of $5.3 billion last year.

Vanguard MSCI Emerging Markets

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