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Core ETF for Investors, but Traders Still Love EEM


It has been nearly two years since BlackRock’s (BLK) iShares, the world’s largest ETF issuer, introduced its first batch of core ETFs, a group of 10 funds that included new and renamed, established products.

One of the new core ETFs was the iShares Core MSCI Emerging Markets ETF (IEMG) , which has been undoubtedly successful. However, despite the obvious advantages offered by IEMG, professional traders still prefer IEMG’s older, larger and costlier relative, the iShares MSCI Emerging Markets ETF (EEM) . EEM is the second-largest emerging markets ETF by assets behind the Vanguard FTSE Emerging Markets ETF (VWO) .

“Wall Street traders are proving there’s one measure they care about more than any other when it comes to these products: liquidity, and lots of it,” reports Boris Korby for Bloomberg.

In terms of on-screen volume, only two U.S.-listed ETFs are more heavily traded than EEM – the SPDR S&P 500 ETF (SPY) and the iShares Russell 2000 ETF (IWM) . The only U.S. stock that is more heavily traded, on average, than EEM is Apple (AAPL), according to Bloomberg.

Those statistics, while important to traders, do not diminish the success of IEMG. Since the ETF debuted in October 2012, it has amassed nearly $5.3 billion in assets under management. IEMG has been bolstered by its status as low-cost alternative to IEMG and even large institutional investors have taken advantage of the ETF’s 0.18% expense ratio. [Institutions Love iShares Core ETFs]

By comparison, EEM charges 0.67% per year, but that is of little concern to traders that do not plan on holding the ETF for a year. No ETF gained more assets than EEM in the second quarter when the fund pulled in almost $6 billion.

EEM has a tighter bid/ask spread of 2.3 cents compared to 2.8 cents on IEMG, according to Bloomberg.

IEMG, which has added over $1.5 billion in new assets this year, is up 11.1% year-to-date. The core offering allocates a combined 55.6% of its weight to China, South Korea, Taiwan and Brazil. Those countries combine for about 55.8% of EEM, according to iShares data.

Last month, iShares doubled the size of its core lineup to 20 ETFs. [iShares Makes Major Additions to Core Lineup]

iShares Core MSCI Emerging Markets ETF


Tom Lydon’s clients own shares of Apple, EEM, IEMG, IWM and SPY.