Flows Shift A Bit In EEM-VWO Asset Battle

October 23, 2012

It’s been a big month for emerging markets ETF investors.


On Oct. 2, Vanguard announced it would be shifting the underlying index on its popular Vanguard MSCI Emerging Markets ETF (NYSEArca: VWO) from its current MSCI index to the FTSE Emerging Index during the first half of 2013.

BlackRock Chief Executive Laurence Fink, quoted by Reuters, told analysts in a conference call that it appears funds had been flowing into his firm’s iShares MSCI Emerging Markets Index Fund (NYSEArca: EEM)—and not into VWO—as a result of Vanguard’s planned index change.

But did they?

IndexUniverse monitors daily ETF flows—you can check out our online tool here—so it’s an easy claim to check.


Fund Flows: EEM vs. VWO


The iShares Emerging Markets ETF’s (NYSEArca: EEM) flows over the past three weeks have indeed eclipsed VWO’s flows, but there are two notable points here.

First, the $1 billion-plus that has gone into EEM since the Vanguard announcement didn’t start flowing until Oct. 15—a good two weeks after the Vanguard announcement.

It’s possible that the money did indeed come from typical Vanguard investors who were sitting on extra cash and, after doing two weeks of due diligence, decided that it made sense to begin switching over to EEM.

But then again, it’s also possible that a few institutional investors decided it was a good time to up their emerging markets allocations.

Crucially, money hasn’t actually flowed out of VWO. In fact, about $42 million has flowed into it since Vanguard announced the index would be switching next year.

Broadly, both funds’ assets under management (AUM) have remained relatively constant aside from EEM’s slight bump last week.


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