It has been nearly two years since BlackRock’s (NYSE: BLK) iShares, the world’s largest ETF issuer, introduced its first batch of core ETFs, a group of 10 funds that included new and renamed, established products.
One of the new core ETFs was the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG), which has been undoubtedly successful. However, despite the obvious advantages offered by IEMG, professional traders still prefer IEMG’s older, larger and costlier relative, the iShares MSCI Emerging Markets ETF (NYSEArca: EEM). EEM is the second-largest emerging markets ETF by assets behind the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO).
“Wall Street traders are proving there’s one measure they care about more than any other when it comes to these products: liquidity, and lots of it,” reports Boris Korby for Bloomberg.
In terms of on-screen volume, only two U.S.-listed ETFs are more heavily traded than EEM – the SPDR S&P 500 ETF (NYSEArca: SPY) and the iShares Russell 2000 ETF (NYSEArca: IWM). The only U.S. stock that is more heavily traded, on average, than EEM is Apple (NasdaqGS: AAPL), according to Bloomberg.
Those statistics, while important to traders, do not diminish the success of IEMG. Since the ETF debuted in October 2012, it has amassed nearly $5.3 billion in assets under management. IEMG has been bolstered by its status as low-cost alternative to IEMG and even large institutional investors have taken advantage of the ETF’s 0.18% expense ratio. [Institutions Love iShares Core ETFs]
By comparison, EEM charges 0.67% per year, but that is of little concern to traders that do not plan on holding the ETF for a year. No ETF gained more assets than EEM in the second quarter when the fund pulled in almost $6 billion.
EEM has a tighter bid/ask spread of 2.3 cents compared to 2.8 cents on IEMG, according to Bloomberg.
IEMG, which has added over $1.5 billion in new assets this year, is up 11.1% year-to-date. The core offering allocates a combined 55.6% of its weight to China, South Korea, Taiwan and Brazil. Those countries combine for about 55.8% of EEM, according to iShares data.
Last month, iShares doubled the size of its core lineup to 20 ETFs. [iShares Makes Major Additions to Core Lineup]
iShares Core MSCI Emerging Markets ETF
Tom Lydon’s clients own shares of Apple, EEM, IEMG, IWM and SPY.