iShares Core MSCI Emerging Markets ETF

IEMG

Market cap $149B

As U.S. fund outflows hit a 16-year high and volatility spikes, emerging market ETFs offer a path to diversification and growth.

Almost 1,000 active ETFs launched in 2025, but did their performance substantiate the demand? Across the universe of funds, active managers for ETFs and mutual funds found that outperformance was elusive compared to their passive peers based on the latest Morningstar US Active/Passive Barometer report.

IEMG carries a slightly higher expense ratio and a lower dividend yield than VXUS. IEMG's one-year return outpaced VXUS, but it has experienced a steeper five-year drawdown.

Roxanna Islam, head of sector and industry research at VettaFi, joined Nate Geraci on this week's ETF Prime to discuss record international equity flows. The category saw net inflows of over $220 billion in 2025 with momentum continuing into 2026 at roughly $75 billion year-to-date.

Both developed and emerging market international stocks have beaten the S&P 500 by a wide margin over the past year. Their relative value and accelerating growth profiles look attractive even after their recent rally.

Emerging market ETFs are back in focus. Two of the ten largest U.S.-listed ETF inflow winners year-to-date are broad EM funds.

The exit velocity from 2025 is continuing into 2026. Exchange-traded funds (ETFs) have already gathered over $250 billion in inflows in the first six weeks of the new year, proving that demand for the investment vehicle remains robust despite a volatile start.

The iShares Core MSCI Emerging Markets ETF (IEMG) commands a much larger asset base and higher liquidity than the Schwab Emerging Markets Equity ETF (SCHE). IEMG experienced a slightly deeper drawdown over five years.

Most emerging market ETFs are built around the same assumption: that China's economy and equity markets will drive returns for decades.

There's no stopping the momentum in the ETF market. January 2026 brought a record $166 billion in net inflows, surpassing the last three Januarys combined.