ETF Investors Are Influencing Emerging Market Assets

Exchange traded funds have helped democratize the investment process, allowing investors from all walks to access a plethora of asset categories. With the rising popularity of ETFs, investors are now beginning to influence the emerging markets.

According to Citigroup, ETF investors have established increasing sway over emerging market stocks and bonds, reports Adam Samson for the Financial Times.

ETFs that track emerging market assets have now accumulated almost $250 billion dollars under management, with $196 billion in equities and $48 billion in fixed income. EM ETF assets are now equivalent to a fifth of total emerging market mutual fund assets under management. In contrast, the figure was just above 12% two years ago.

The sixth-biggest ETF by assets, Vanguard FTSE Emerging Markets ETF (NYSEArca: VWO), tries to reflect broad emerging market stock. The iShares Core MSCI Emerging Markets ETF (NYSEArca: IEMG) was the fourth most popular ETF trade of 2017, attracting $12.3 billion in net inflows year-to-date, according to XTF data. VWO was the ninth most popular ETF trade of the year, with $6.6 billion in new inflows.

“ETF flows themselves increasingly representative of asset class sentiment as a whole,” Citi’s Luis Costa said in a note.