Top Active Emerging-Market ETF Sees Surge in Inflows as US Tariffs Struck Down

The largest actively-managed exchange-traded fund tracking emerging equities saw a surge in inflows after the Supreme Court's strikedown of President Trump's global tariffs, highlighting renewed demand for risk assets.

The $20.3 billion Avantis Emerging Markets Equity ETF recorded $429.5 million in new cash on Friday, its largest daily inflow since May 13 and pushing assets to their highest level on record. The surge in flows came on the same day Trump's sweeping global tariffs were struck down by the Supreme Court, giving yet another tailwind for the region's equity markets. Trump later announced a new 15% across-the-board levy, which effectively resets the playing field for America's trade partners, by removing the more punitive tariffs leveled on India, China and Brazil.

"Though it's probably not the end of the story, the headline is a net positive and markets should respond positively to the removal of policy uncertainty," said Malcolm Dorson, a senior portfolio manager at Global X Management Co.

Emerging-market ETFs tracking stocks have attracted more than $35 billion in net inflows this year, Bloomberg data show, with equity benchmarks from Brazil and Colombia to South Korea hovering near all time highs.

Gaining Momentum

The roughly $553 billion emerging-market equity ETF universe has long been dominated by passive strategies, which account for more than 90% of total assets, according to the data. But active funds are gaining momentum, pulling in more than nearly 15% of year-to-date inflows as investors seek expertise to market uncertainties and opportunities across the developing world.

"Many investors aren't happy with the traditional index, which is about 80% Asia and over 25% China," said Dorson. "They see the opportunity in the entire asset class and are shying away from the benchmark concentration risks -- this means they are both moving assets to active managers and also creating their own allocations via single country ETFs."

Investors have showed growing interest for countries in Latin America, including Argentina, Colombia and Brazil, according to Dorson. The region’s equity markets have seen a surge in overseas buying, helping push the MSCI EM Latin America Index to an eleven-year high.

Global X MSCI Argentina ETF, one of the main securities for investors interested in putting money in a country, has attracted $45 million in new cash so far this year.

"After almost 15 years of underperformance, investors are seeing all the ingredients for powerful EM cycle: a weaker USD, a dovish fed, a stable China and strong commodity prices," said Dorson.

Inflows to US-listed emerging market ETFs that invest across developing nations as well as those that target specific countries totaled $2.61 billion in the week ended Feb. 20, compared with gains of $3.98 billion in the previous week, according to data compiled by Bloomberg. So far this year, inflows have totalled $32.7 billion.

Regionally, South Korea had the biggest inflow, of $694.7 million, led by iShares Inc's iShares MSCI South Korea. The BlackRock Inc. fund has seen strong demand so far this year as investors double down on Asia's semiconductor rally.

• Stock ETFs expanded by $2.52 billion.
• Bond funds rose by $85 million.
• Total assets rose to $511 billion from $500.8 billion.
• The MSCI Emerging Markets Index closed up 0.8 percent from the previous week at 1,567.23 points.
• South Korea had the biggest inflow, of $694.7 million, led by iShares Inc's iShares MSCI South Korea.
• No individual country suffered an outflow.

Note: Figures are calculated by country weight using flows to US-listed ETFs. Bloomberg updated the screening criteria in November 2024. Use Bloomberg screening tools to create custom filters.

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