2026 Is the Year to Pick Your Emerging-Market ETF Carefully
The three largest emerging-market ETFs - Vanguard Emerging Markets Stock Index Fund ETF Shares, iShares MSCI Emerging Markets ETF, and Avantis Emerging Markets Equity ETF - have delivered different returns over the past year, with gains of 37%, 53%, and 56% respectively. The differences in their performance are due to variations in index construction, country inclusion, and management style.
Emerging-market equities have risen sharply over the past year, with the three largest ETFs capturing this move differently. Vanguard Emerging Markets Stock Index Fund ETF Shares (VWO) is up 37%, iShares MSCI Emerging Markets ETF (EEM) has advanced 53%, and Avantis Emerging Markets Equity ETF (AVEM) has climbed 56%. The revival in EM equities is driven by a weaker dollar, resilient semiconductor demand, and renewed foreign flows into China and India. VWO tracks the FTSE Emerging Markets All Cap China A Inclusion Index, including China A-shares but excluding South Korea. EEM tracks the MSCI Emerging Markets Index, holding a 16.15% weight in South Korea. The differences in index construction and country inclusion explain the performance dispersion among the ETFs. Investors should choose their emerging-market ETF carefully, considering factors such as cost structure, diversification, and exposure to specific countries.
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