For years, the iShares MSCI Emerging Markets ETF (NYSEArca: EEM) was the most widely recognized and largest emerging markets exchange traded fund.
Home to $32.2 billion in assets under management, EEM is still one of the largest ETFs on the market and it is the second-largest emerging markets ETF behind the Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), but investors have steadily been departing EEM for other emerging markets ETFs.
In 2014, EEM suffered $5.4 billion of outflows, the second-worst total among all U.S. ETFs, but that may more a case of changing investor preferences, not outright abandonment of emerging markets ETFs, reports Chris Dieterich for Barron’s.
Nor do outflows from EEM mean investors are leaving iShares emerging markets ETFs. While EEM has already lost over $1 billion since the start of this year, the iShares MSCI Emerging Markets Minimum Volatility ETF (NYSEArca: EEMV) has added over $34 million in new assets.
EEMV tracks the 200 least volatile stocks from the MSCI Emerging Markets Index. The ETF debuted in October 2011 and now with almost $2 billion in assets, has outperformed EEM for three consecutive years. [Low Vol ETF Advantage]
Investors, even at the institutional level, have shown they do care about costs. In part, that explains the rise of the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG). IEMG debuted in October 2012 as part of the iShares core lineup of low-fee ETFs aimed at cost-conscious investors, but with almost $6.3 billion in assets, it is clear IEMG has received heavy institutional support. The ETF is not much different from EEM, except for IEMG charges just 0.18% per year compared to EEM’s annual fee of 0.67%.[Institutions Love ETFs]
Still, diversified emerging markets ETFs such as EEM, IEMG and VWO face increasing competition from nuanced funds. For example, investors pumped almost $292 million into the EGShares Beyond BRICs ETF (NYSEArca: BBRC) last year in an effort to dodge BRIC exposure.
Speaking of dodging the BRIC nations, the Guggenheim MSCI Emerging Markets Equal Weight ETF (NYSEArca: EWEM) recently changed indexes to the MSCI Emerging Markets Equal Country Weighted Index, becoming the first emerging markets ETF to track a benchmark that equally weights at the country level. While that does not eliminate EWEM’s BRIC exposure, it does reduce the fund’s weight to Brazil, Russia, India and China relative to cap-weighted emerging markets ETFs. [EM ETF Goes Equal-Weight by Country]
iShares MSCI Emerging Markets ETF
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Mr. Lydon serves as an independent trustee of certain mutual funds and ETFs that are managed by Guggenheim Investments; however, any opinions or forecasts expressed herein are solely those of Mr. Lydon and not those of Guggenheim Funds, Guggenheim Investments, Guggenheim Specialized Products, LLC or any of their affiliates. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.