It is widely known that lower fees are one of the primary drivers of the exchange traded fund industry’s growth and why so many advisors and investors are departing higher-cost actively managed mutual funds for ETFs.
That sentiment applies to emerging markets ETFs, including the increasingly popular iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG). IEMG was one of the top asset-gathering ETFs last year. In October, BlackRock lowered IEMG’s annual fee to 0.14% from 0.16% as part of a broader range of expense ratio reductions to the iShares core lineup. Year-to-date, only two ETFs have added more than $1.7 billion gained by IEMG.
Although some developing economies have been viewed as vulnerable to Donald Trump’s presidency and there are concerns about the impact of interest rate increases by the Federal Reserves on emerging markets that have to service dollar-denominated debt, some market observers believe emerging equities can perform well again in 2017.
Emerging market assets have already struggled and may be past their lowest point. The EM segment could slowly improve from here with strengthening current account balances, rising commodity prices and better fundamentals.
“IEMG is home to over $20.6 billion in assets under management, a figure that confirms two notions about ETFs. First, investors are embracing passive index funds and ETFs, in part, for lower fees. Second, institutional investors know the role that fees can play in eroding long-term performance and they are flocking to IEMG as well,” reports Investopedia.