For Some ETFs, Cheaper Really is Better

Low fees have been widely cited as one reason why passively managed index funds and exchange traded funds continuing pilfering assets from pricier actively managed mutual funds. Investors’ preference for low-cost products extends to international ETFs.

Just look at the iShares Core MSCI Emerging Markets ETF (NYSEArca:IEMG), the low-cost answer to the popular iShares MSCI Emerging Markets ETF (NYSEArca:EEM). Year-to-date, only one ETF has added more new assets than the $10.9 billion added by IEMG.

IEMG was the most popular ETF of the first quarter, bringing in $6.6 billion in net inflows so far this year, according to XTF data. Investors may be looking at this cheap EM option as a way to gain access to emerging markets where valuations are much lower than the loftier prices in U.S. markets.

“It took the iShares Core MSCI Emerging Markets ETF, symbol IEMG, four-and-a-half years from its 2012 launch to eclipse its 14-year-old iShares peer and become the second-biggest developing market equity exchange-traded fund,” reports Elena Popina for Bloomberg.

IEMG charges just 0.14% per year, or $14 on a $10,000 investment. That puts the ETF in competition with the Vanguard FTSE Emerging Markets ETF (NYSEArca:VWO) among the least expensive emerging markets ETFs. Conversely, EEM, a favorite of institutional investors, charges 0.72% on an annual basis.