As the first quarter of trading draws to a close with global equities weakening off of all-time highs, Emerging Markets continue to pull their weight with relative outperformance to the S&P 500.
The two largest funds in the space in terms of asset size, the $50.7 billion VWO (Vanguard FTSE Emerging Markets, Expense Ratio 0.14%) and the $29.8 billion EEM (iShares MSCI Emerging Markets, Expense Ratio 0.67%) are impressively outracing the S&P 500 year-to-date, even with the recent hiccup in global equities.
VWO has packed in more than $1.5 billion year-to-date while EEM has seen inflows to a lesser degree ($385 million in), but the trend across the board in these two ETFs, as well as the third largest fund in the segment, the $26.5 billion IEMG (iShares Core MSCI Emerging Markets, Expense Ratio 0.14%) has seen buyers, even on weakness.
IEMG itself has seen a massive $5.4 billion enter the fund just year-to-date, including more than $750 million just this week alone. That is quite a staggering amount inside of a three month period for the 3-star Morningstar rated fund that debuted in late October of 2012.
After these top three funds in the Emerging Markets Equity space, there is a rather steep drop-off in terms of asset sizes in other ETFs in this segment. When we look at IEMG head to head against its more tenured cousin EEM (which debuted in 2003) fund literature suggests the following: “1) Exposure to a broad range of emerging market companies 2) Low cost, comprehensive access to stocks in emerging market countries and 3) Use at the core of a portfolio to diversify internationally and seek longterm growth.”
We see one thousand eight hundred ninety-three individual equities within the IEMG portfolio, as compared to only eight hundred forty-three in EEM as the funds track two different indices, the MSCI Emerging Markets Investable Market Index and the MSCI Emerging Markets Index respectively and it seems that iShares developed IEMG over time for more efficient and more specialized access to the MSCI Emerging Markets universe.
The low price tag with an expense ratio of only 0.14% versus EEM’s 0.67% is likely attracting not only retail but institutional portfolio managers as well, as IEMG seems intentionally priced on par with the larger VWO which debuted back in 2005. Notably, the combined assets under management of EEM and IEMG outpace VWO by about $6 billion presently.
The iShares Core MSCI Emerging Markets ETF (NYSE:IEMG) was trading at $48.19 per share on Thursday morning, up $0.04 (+0.08%). Year-to-date, IEMG has gained 13.52%, versus a 5.18% rise in the benchmark S&P 500 index during the same period.
Disclaimer: The content of this article is excerpted from a daily newsletter from Street One Financial. While ETF Daily News may edit the contents and add a relevant title to the piece, the author, Paul Weisbruch, does not endorse or recommend any issuer or security mentioned herein.
Paul Weisbruch is the VP of ETF/Options Sales and Trading at Street One Financial. Prior to joining the team at Street One, Paul served as the Director of RIA and Institutional ETF Sales at RevenueShares ETFs from December 2007 until November of 2009. Before RevenueShares, Paul was employed by Susquehanna International Group from 2000 until 2007 serving in roles including OTC/NYSE Institutional Block Trading, Nasdaq/OTC Market Making, ETF/Derivatives Intelligence and Strategy, Algorithmic Trading, as well as acting as the PHLX Floor Specialist in the ETFs, SPY and DIA.Paul has been actively involved in the ETF space from both a product and trading standpoint since 2000. Additionally, Paul has well forged relationships with national RIAs, institutional pension fund managers and consultants, mutual fund and hedge fund managers, and also the ETF media. Co-authoring the “S1F ETF Daily” since 2009, the daily piece has become a must for many portfolio managers in the ETF space, with segments regularly appearing in the likes of Barron’s, WSJ, and ETFTrends.com for instance.
He holds his Series 4 (Registered Options Principal), 6, 7, 55 (Equity Trader), 63, and 65 licenses. He graduated from the University of Pittsburgh (B.S. – Economics), graduating magna cum laude, and has an MBA from Villanova University.