Welcome back to ETFs Around the World, the series that considers some of the most interesting regional ETFs on the market today. As global markets continue to evolve, investors have an opportunity to rethink their strategies and tap into high-potential growth areas outside of their home country.  

In previous chapters of this mini-series, we have taken a close look at ETFs that focus on Japan, India, Europe, China, and global equities, comparing two top-performing funds from each of these regions or groups.   

This series isn’t about picking winners – it's about exploring new angles and considering how regional dynamics could shape your ETF portfolio. Whether you're already familiar with these Markets or are looking for fresh insights, we’ll help you navigate the evolving landscape of international ETFs with a new lens.  

Today, we zoom out to assess two ‘Emerging Markets’ funds, the iShares MSCI Emerging Markets ETF (ASX: IEM) and the Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE). 

This article was produced 19 March 2025.  

Key takeaways: 

• The iShares MSCI Emerging Markets ETF and the Vanguard FTSE Emerging Markets Shares ETF hold similar levels of net assets. 

• While IEM holds funds in over 800 securities, and VGE is invested in thousands of different stocks, the top 10 for each fund is nearly identical, and there is only a small difference in the weight of each cohort in relation to the total assets of each fund. 

• Since inception, IEM holds a superior track record in terms of average total returns, but VGE has yielded superior results over the last one, three, and five-year timelines. 

• Vanguard seeks to pay quarterly distributions for VGE, while iShares targets semi-annual distributions for IEM.  

• It is important to always do your own research before making decisions to invest.  

• Past performance is not an indicator of future performance.  

While China and India are often thought of as the most prominent Emerging Markets, it is estimated that Emerging Markets account for roughly 80% of global growth. 

With this, said economies offer high growth potential, and for investors, a means to diversify one’s portfolios and gain exposure to powerful long-term growth drivers. 

Although investing in Emerging Markets is generally considered higher risk, today’s suite of ETF products focusing on these Markets are designed to mitigate risk to investors. Two of the most popular ASX-listed funds in this space include the iShares MSCI Emerging Markets ETF (ASX: IEM) and the Vanguard FTSE Emerging Markets Shares ETF (ASX: VGE). 

Fund Objective 

Starting with the iShares MSCI Emerging Markets ETF, this fund aims to provide investors with the performance of the MSCI Emerging Markets Index, before fees and expenses. 

According to the fund manager, this index is intended to track the “equity Market performance in global Emerging Markets”. More specifically, this encompasses a focus on over 800 mid and large-cap companies from these Markets. 

In the case of the Vanguard FTSE Emerging Markets Shares ETF, this fund aims to deliver returns corresponding with the performance of the FTSE Emerging Markets All Cap China A Inclusion Index in Australian dollars, with net dividends reinvested, before considering fees, expenses, and tax. 

The fund invests in thousands of equities from what includes, at the time of writing, 26 Emerging Markets. Vanguard advises that the product is most suited to “buy and hold investors seeking long term capital growth and international diversification via exposure to a diversified portfolio of Emerging Market securities”. 

Fund Profiles 

When it comes to the profiles of the two funds, both IEM and VGE share similarities when comparing the duo based on the February edition of the ASX’s Investment Products monthly update. 

At the end of February 2025, IEM held $1.3 billion in funds under management (FUM). This coincided with a $4.2 million decline in FUM over the month, despite $3.5 million in net inflows. 

Meanwhile, VGE controlled $1.2 billion in net assets at the same date. It recorded a decline of $1.8 million in FUM through February, while net inflows totalled $8.8 million. 

Across all ASX trading (broker) participants, there were 8,334 trades in IEM, versus 7,813 for VGE. By transacted value, the pair recorded $49.0 million and $40.1 million worth of trades respectively, with average trades sizes of $5,876 and $5,137. In terms of liquidity, IEM reported a monthly figure of 3.66%, whereas VGE posted monthly liquidity of 3.38%. 

Despite being similar on some metrics, the iShares MSCI Emerging Markets ETF was admitted to trading on the ASX in October 2007, six years earlier than the Vanguard FTSE Emerging Markets Shares ETF, which debuted in November 2013. 

Fund Holdings 

As mentioned earlier, the two funds both hold a significant number of equities across Emerging Markets. VGE holds thousands of individual positions, while IEM invests in over 800 securities. 

Although this may seem like a vast difference in terms of overall exposure, given the volume of securities held by each fund, diversification becomes less easy to distinguish.  

At the same time, both IEM and VGE feature a near identical set of names among their top 10 holdings, as shown below. There is a modest difference in the overall percentage of net assets that these cohorts represent within their respective fund, at 27.44% and 23.31% respectively. 

By geographic exposure, as at March 14, 2025, the top five countries in which IEM holds shares are as follows: China (31.89%); Taiwan (17.51%); India (16.86%); South Korea (9.10%); and Brazil (4.31%). 

For the comparable exercise above, albeit dated January 31, 2025, VGE was invested most heavily in: China (29.9%); India (22.0%); Taiwan (21.0%); Saudi Arabia (4.5%); and Brazil (4.4%). 

 ^ = as at March 14, 2025 - rounded to two decimal places 

* = as at February 28, 2025 - rounded to two decimal places 

As far as sector exposure, the two funds offer similar coverage to the different sectors of the Market. However, based on the available data below, VGE offered slightly greater exposure to Information Technology shares, whereas IEM offset this with greater exposure to Communication Services stocks. 

^ = as at March 14, 2025 - rounded to one decimal place 

* = as at January 31, 2025 - rounded to two decimal places 

Performance and Distributions 

Since inception, the iShares MSCI Emerging Markets ETF has delivered an average annual total return of 8.05%. By way of comparison, the return since inception for the Vanguard FTSE Emerging Markets Shares ETF has averaged a total of 6.55% per annum. These figures were taken as at February 28, 2025. 

Over the preceding one, three, and five-year periods, the average total returns for IEM were 15.22%, 4.71% per annum, and 3.93% per annum. For VGE, the fund’s one-year total return to the end of February was 16.82%, while the three and five-year total returns averaged 5.73% and 5.08% per annum respectively. 

While the iShares MSCI Emerging Markets ETF has typically paid semi-annual distributions to unitholders, this is less frequent than the Vanguard FTSE Emerging Markets Shares ETF, which has historically paid quarterly distributions. 

In keeping with all ETFs, the amount and timing of distributions will vary from period to period, and there may even be periods where no distributions are made. 

Fees 

The management fee for the iShares MSCI Emerging Markets ETF is currently 0.69% per annum. This is higher than the corresponding fee charged by Vanguard for its FTSE Emerging Markets Shares ETF, which is 0.48% per annum. 

Management fees are calculated in relation to the net asset value (NAV) of each fund daily, and prospective investors should note that other fees may apply.  

Please refer to the relevant Product Disclosure Statements for up-to-date details on costs and expenses, which may be deducted from the fund’s assets as and when they are incurred. 

Summary 

Across numerous categories, the iShares MSCI Emerging Markets ETF and the Vanguard FTSE Emerging Markets Shares ETF, which both track the performance of a large basket of shares across Emerging Markets, are largely similar. The pair boast comparable net assets, with only modest differences among major holdings, including sector and geographic exposure. 

Nonetheless, with minor variances detailed above, and the management fee for IEM being more expensive than that of VGE, the funds have different performance records. While the former has delivered a superior return over the timeframe dating back to each fund’s inception, the latter has outperformed over the last one, three, and five years. VGE also pays a quarterly distribution, whereas IEM targets semi-annual distributions. 

For more information, you can read about the iShares MSCI Emerging Markets ETF here, and the Vanguard FTSE Emerging Markets Shares ETF here. Before investing in any ETFs, you should consult the respective product’s Product Disclosure Statement, which will be available on the fund’s website.