Ian Salisbury in the August 4th Wall Street Journal discusses two prominent developing nations ETFs in “Vanguard Takes ETF Turf”.
Many investors seeking to invest in developing nations now use exchange traded funds. Much of the money in developing nations funds has been in iShares MSCI Emerging Markets Index Fund (EEM), which has approximately $20 billion in holdings. Large traders are attracted to its heavy trading volume which makes it easy to buy and sell shares.
Through July 23 of this year, investors put approximately $2.13 billion into the Vanguard Emerging Markets ETF (VWO) while taking $2.8 billion out of comparable the iShares ETF, according to AMG Data Services.
Morgan Stanley analyst Paul Mazzili started recommending the Vanguard fund over iShares in early 2007 after it switched its benchmark to match the benchmark used by the iShares fund. The main reason for this was the expense ratio of the two funds – Vanguard’s expense ratio is only 1/3 that of the iShares offering.
If the funds matched the past 20 years of performance data for the index (17.65%), one could invest $10,000 today in each fund and the Vanguard fund would earn $245,544 in 2028 while iShares would earn $222,626 – a difference of nearly $23,000, according to the Financial Industry Regulatory Authority’s expense analyzer.