Emerging market ETFs have been attracting billions of dollars in inflows over the past month, but one fund has been conspicuously left out.
Meanwhile, the competing Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO) attracted $1.2 billion in the past month and the iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG) gathered $906 million in inflows.
Investors likely ignored EEM in favor of VWO and IEMG due to costs. While the three ETFs all track the broad emerging markets, VWO comes with a cheap 0.15% expense ratio and IEMG has a 0.14% expense ratio, but EEM trades with a costly 0.69% expense ratio. The cheaper fees help long-term investors gain an edge over costlier products.
In the past couple of years, investors have increasingly turned to cheaper options to gain long-term exposure to various market segments. For instance, over the past three years, IEMG has added $15 billion, whereas the older and costlier EEM has experienced $7.7 billion in outflows.
Nevertheless, EEM is still a relevant investment as its vast liquidity and tight bid/ask spreads attract large institutional traders whom care more about executing large bets quickly than the long-term cost of holding the fund.