Exchange traded funds (ETFs) are in the spotlight as the culprit to a sell-off in emerging markets, creating more volatility than before. Assets have been flowing from foreign-related ETFs into domestic ETFs. Managers point to a Brazilian index where outflows have come from passive investors, such as ETFs, and that the stock market in Brazil has been disappointing. Murray Coleman for Barrons reports on the outflows.
Is this accusation fair to ETFs? Coleman says that investors are worried price inflation in food and other goods in emerging markets will start eating into profits. U.S. investors are shifting their assets closer to home. [ U.S. ETFs Leave Emerging Markets In The Dust. ]
Not all emerging markets are suffering however, as Russia and Peru are looking strong, and attracting asset flows. Also, the leading emerging-market funds are improving in at least one way: They're doing better at tracking their underlying benchmarks. [ Emerging Markets ETFs: Still In The Game? ]
The two most popular, broad-based ETFs for emerging markets are:
- iShares MSCI Emerging Markets (NYSEArca: EEM)
- Vanguard Emerging Markets (NYSEArca: VWO)
Tisha Guerrero contributed to this article.