The 10 Best Performing Emerging Market ETFs over the Last 10 Years
Most investors accept that US equities have typically outperformed their global counterparts on a return basis. That has been particularly true for emerging markets in relation to US stocks.
However, the current performance spread between the MSCI Emerging Market Index and the S&P 500 may have some investors anticipating a mean reversion. As of September 30, 2024, the total return performance gap between the S&P 500 and emerging markets has expanded to 4 to 1, which is well above the near-35-year average ratio of 2.2.
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The significant divergence between these two indices has been influenced by a combination of global economic headwinds, particularly in China, alongside rapid advancements in AI in the U.S. and a relatively strong U.S. dollar.
However, market sentiment may be shifting following significant central bank policy changes. The People’s Bank of China has introduced a fiscal and monetary policy plan that includes rate cuts aimed at stimulating growth. Concurrently, a recalibration of U.S. monetary policy, featuring a 50 basis point Fed Funds rate cut in September, can potentially soften the US dollar’s strength against other currencies, which can bolster growth for companies that rely on exporting to the U.S.
The influence of China’s monetary decisions on emerging market ETFs is particularly potent, as nearly a third of the holdings in the MSCI Emerging Market Index (represented by EEM here) are Chinese stocks. Thus, any significant policy changes by China’s central bank can ripple across most emerging market strategies.
As mentioned above, the Federal Open Market Committee (FOMC) voted to lower interest rates by a half point on September 18th, and FOMC Chair Jerome Powell highlighted increased downside risks to employment in his statement. This shift in focus towards maximizing employment suggests that the Fed may be feeling more confident about inflation, which is now within their target range. The priority now shifts to maintaining price stability.
If the Fed can continue to keep prices stable, it may encourage conditions where equities–including emerging market stocks–thrive, as we found in our recent white paper, “Which Asset Classes Perform Best When Inflation Is Driven Lower?“. During controlled inflation regimes, emerging market stocks produced average returns of 19.3%, far surpassing the MSCI Emerging Markets index’s annualized return of 4.4% over the last decade.
Moreover, Emerging Markets trounced the S&P 500 between 2006-2007, highlighting the potential benefits of overcoming the typical home-country bias in investing and increasing geographic diversification in a portfolio’s equity sleeve.
With that in mind, we composed a list of the best-performing Emerging Market ETFs on a 1, 3, 5, 10, and year-to-date basis (excluding leveraged, inverse, and single-country Emerging Market ETFs).
In addition, you’ll see examples of how efficiently you can examine the geographic exposure of each fund using Quickflows in YCharts.
Click to jump to a section:
- Best-Performing Emerging Market ETFs YTD
- Best-Performing Emerging Market ETFs over the Last Year
- Best-Performing Emerging Market ETFs in the Last 3 Years
- Best-Performing Emerging Market ETFs in the Last 5 Years
- Best-Performing Emerging Market ETFs in the Last 10 Years
- What Was the Growth of $10,000 Over the Last 10 Years?
Best Performing Emerging Market ETFs YTD
These are the best-performing Emerging Market ETFs year-to-date in 2024, as of September 30, 2024.
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Interested in seeing the geographic exposure of these funds? It only takes two taps on your tablet or two clicks on your desktop with Quickflows:
Best-Performing Emerging Market ETFs over the Last Year
These are the best-performing Emerging Market ETFs over the past year as of September 30, 2024.
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Best Performing Emerging Market ETFs in the Last 3 Years
These are the best-performing Emerging Market ETFs on an annualized basis between September 30, 2021 and September 30, 2024.
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Best Performing Emerging Market ETFs in the Last 5 Years
These are the best-performing Emerging Market ETFs on an annualized basis between September 30, 2019 and September 30, 2024.
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Best Performing Emerging Market ETFs in the Last 10 Years
These are the best-performing Emerging Market ETFs on an annualized basis between September 30, 2014 and September 30, 2024.
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What Was the Growth of $10,000 Over the Last 10 Years?
If you invested $10,000 10 years ago into any of the ten best-performing Emerging Market ETFs over the last 10 years, your balance today would be no less than $15K. (See the best-performing equity ETFs and Value ETFs for comparison)
The best-performing Emerging Market ETF over the past decade was the WisdomTree Emerging Markets Small Cap Div ETF (DGS). A $10,000 investment into DGS 10 years ago would be worth over $17K today. Right behind it was the First Trust Emerging Markets Small Cap AlphaDEX® ETF (FEMS) and the SPDR® S&P Emerging Markets Small Cap ETF (EWX); investing $10,000 into FEMS or EWX back in 2014 would’ve also turned into over $17K.
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The recent performance gap between the S&P 500 and the MSCI Emerging Market Index may signal an opportunity for a strategic or tactical rebalance in anticipation of a possible mean reversion.
Advisors and distribution teams can effectively explore and compare the performance of various Emerging Market ETFs using YCharts tools like the Fund Screener, Comp Tables, and Quickflows, simplifying the process of identifying top performers or assessing geographic exposures with ease. These functionalities underscore the utility of YCharts in facilitating informed investment decisions, particularly in a shifting economic landscape.
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3. Sign up to receive a copy of our latest research, “Which Asset Classes Perform Best As Inflation is Driven Lower.”
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