In the battle for ETF dollars, Vanguard is steadily gaining on the competition (namely BlackRock) when it comes to its hugely popular emerging market index tracker. While BlackRock's fund saw better inflows in June, the trend favors its rival. As usual, Vanguard is gaining ground by competing on price.
It seems to be a case of knowing what you get when you buy an index fund. Both track the MSCI emerging markets index, but BlackRock's iShares MSCI Emerging Markets Index Fund (EEM) is more actively managed, and comes with a higher 0.72 percent expense ratio. Vanguard's Emerging Market Index Fund (VWO) costs just 0.27 percent. And that appears to be making a difference to investors, according to Investment News, which says experts believe "the $24.7 billion Vanguard fund will continue to take assets away from the $35 billion iShares fund. Despite last month, so far this year the Vanguard fund has taken in $6.8 billion, compared to $1.6 billion for the iShares fund."
Investment News: BlackRock's emerging-markets ETF outpaced Vanguard's in June
[See Why Emerging Markets Belong in Your Portfolio from U.S. News.]
Emerging markets, with their hoped-for consumer booms and relatively modest debt burden compared to the developed world, should continue to draw inflows of all sorts. However, most of that money has gone to stock funds in part because of a relative dearth of emerging market debt ETFs. But bonds—and emerging market bonds—become one of the hotter sectors for new index products. Wisdom Tree is adding WisdomTree Dreyfus Commodity Currency Fund (CCX) and the WisdomTree Emerging Market Local Debt Fund (ELD) to it's line-up, ActiveETFs notes, following offerings last month from DoubleLine and Grail Advisors.
Still, not everybody is jumping on the bond bandwagon in light of the struggling global economy. Jim Rogers echoes his long-time emerging markets/commodity theme again this week, but he's eyeing agricultural commodities like sugar and rice and other natural resources - and advising investors to steer clear of bonds.
[See if Your Portfolio is Ready for a Double-Dip Recession from U.S. News.]
More broadly, weekly mutual fund flows continue to favor bonds through the end of June. The Investment Company Institute's weekly report shows long-term funds saw $4.74 billion in inflows during the week ending June 30, with bonds offsetting $180 million worth of outflows from stock funds. Stock funds have been losing ground since May as investors fled sovereign debt woes in Europe and uncertain domestic equity markets.