Emerging Market ETFs: VWO Takes the Lead

On Jan. 18, the iShares MSCI Emerging Index Fund (NYSEArca: EEM) dropped to $46.36 billion in assets while Vanguard Emerging Markets ETF (NYSEArca: VWO), which rolled out two years fter EEM, hit $46.47 billion in assets, reports Olivier Ludwig for IndexUniverse. VWO was also the most popular U.S.-listed ETF in 2010, bringing in $19.34 billion.

Two reasons are attributed to VWO’s gain to fame. VWO has an expense ratio of 0.27%, as compared to EEM’s expense ratio of 0.69%. While both EEM and VWO are based MSCI Emerging Markets Index, which returned about 20% over the last year, VWO performed at 18%, whereas EEM returned 15.5%.

VWO uses a replication strategy that holds more securities than EEM to better mimic the underlying index.

Still, EEM traders enjoy using the fund due to its turnovers. For instance, EEM had turnover of $726.66 billion last year alone, compared to $164.54 billion for VWO, which suggests that VWO attracts greater buy-and-hold investors.

Full list of emerging market ETFs here