Avantis Emerging Markets Equity ETF

AVEM

Market cap $17B

Emerging markets climbed over 25% in 2025 while trading at deep discounts to U.S.

If you're hunting for yield in 2026, emerging market bonds just became more interesting.

Foreign equities stood out in investor portfolios last year, diversifying portfolios away from U.S. megacap tech and adding strong returns at the same time. That momentum appears to be continuing into 2026 as one of the star funds from last year has already added more than $100 million in net inflows.

The average expense ratio for passively managed exchange-traded funds is 0.14%, and for actively managed ETFs, it's 0.44%, according to Morningstar Direct. While low fees are important because the cost of your investment eats into gains, there are some other aspects of ETFs to consider.

The Avantis Emerging Markets Equity ETF ( NYSEARCA:AVEM ) delivered a 35% return in 2025, outperforming Vanguard's largest funds and signaling emerging markets might finally be having their moment.

Emerging markets show strong momentum. With diversification flows rising, a weakening dollar and potential Fed cuts, here are the ETFs to tap the trend.

Emerging markets equity returns have been driven by extreme mega-cap concentration, with index breadth collapsing to historic lows and masking weakness across much of the opportunity set. This concentration has distorted relative results for active managers, particularly those constrained by diversification rules or broad benchmarks, as small-cap underperformance and index construction limit flexibility.

Avantis Emerging Markets Equity ETF (AVEM) has surged over 30% YTD, long term outperforming peers like EEM with superior total returns and narrower drawdowns. AVEM actively overweights technology and Asian equities, particularly China, Taiwan, and India, comprising 77% of holdings. The ETF is unhedged, offering currency upside from dollar weakness, and holds both ADRs and local shares for diversified exposure.

Foreign equities investing has been one of the defining stories of the year. Even before 2025 got started, many investors were considering moving from underweight to neutral, at least, in ex-U.S. equities.

It's been a good year for international equity ETFs. As a category, broad exposure funds tapping into both developed and emerging market equities have delivered outsized gains relative to U.S. markets this year, as well as much sought portfolio diversification.