Investors Piling Into Emerging Markets-Focused EMXC Fund

Investors have added almost $7 billion to the ETF this year.

ETF investors haven’t been that interested in emerging markets this year. Out of the $674 billion of inflows for U.S.-listed exchange-traded funds in 2024, only $4.9 billion has gone into emerging markets ETFs.

The performance for EM stocks has also been underwhelming. The two largest emerging markets ETFs, the Vanguard Emerging Markets Stock Index Fund ETF (VWO) and the iShares Core MSCI Emerging Markets ETF (IEMG), are up 12.1% and 10.5% year-to-date, respectively.

That’s well below the 21% and 17.9% gains for the SPDR S&P 500 ETF Trust (SPY) and the Vanguard Value Index Fund ETF (VTV). 

That said, there is one emerging markets ETF that is soaring—at least when it comes to inflows.

The iShares MSCI Emerging Markets ex China ETF (EMXC) has picked up $6.8 billion of new money this year, the most of any emerging markets ETF by far.

By comparison, VWO and IEMG—each of which has around $80 billion in assets under management— have received outflows of $2.3 billion and $600 million, respectively.

EMXC, which currently has just under $17 billion in AUM, tracks the MSCI Emerging Markets ex China Index, giving it a much different look than broader EM funds like IEMG and VWO.

For instance, IEMG has 22% of its portfolio allocated to China, while EMXC has no positions in Chinese stocks.

Instead, EMXC’s largest geography is India, with a 27% weighting, followed by Taiwan, with 24%, and Korea, with 14%.
For IEMG, India, Taiwan and Korea have smaller weightings of 22%, 19%, and 11%, respectively.

The strong inflows for EMXC this year suggest that some investors are interested in putting money to work in emerging markets stocks, but they don’t want to deal with the risks of China.  

Indeed, Chinese stocks have underperformed dramatically over the past several years, dragging down the returns of emerging markets ETFs.

So far in 2024, EMXC’s performance has been similar to the broader VWO and IEMG—a gain of 11.5% year-to-date.
But its outperforming over the past five years, with a 45% return versus just under 30% for the two larger ETFs.