Record money is pouring into emerging markets, but a single index decision is creating a widening performance gap between two major ETFs. The iShares Core MSCI Emerging Markets ETF attracted $22 billion in new investor money over 12 months, more than double the inflows of the Vanguard FTSE Emerging Markets ETF, and returned 33% versus VWO's 20%. The key difference is that MSCI still classifies South Korea as an emerging market, so IEMG holds Samsung and SK Hynix as its second and third largest positions, while FTSE Russell considers South Korea developed, and VWO excludes them entirely. South Korea's KOSPI Index has dropped more than 10% over the past month, erasing IEMG's earlier edge, with VWO now returning 1.6% versus IEMG's 1.1%. The reversal shows that a heavier allocation to a hot region can boost returns while momentum lasts but become a headwind when leadership changes.
SK Hynix IncSouth Korea's KOSPI Index dropped over 10% in the past month, and SK Hynix is a major holding in IEMG, which underperformed VWO as a result.
Samsung Electronics Co LtdSouth Korea's KOSPI Index dropped over 10% in the past month, and Samsung is a major holding in IEMG, which underperformed VWO as a result.