Why tote around a first-generation iPhone when you have a 5s at home? Or drive a beat-up old Chevy when there’s a new Corvette in the garage? In the world of exchange-traded funds, that’s just what investors are doing.

BlackRock Inc.’s iShares Core MSCI Emerging Markets ETF, rolled out in late 2012, is superior in almost every way to its decade-old predecessor, the iShares MSCI Emerging Markets fund. And yet no ETF in the world has lured more money since the first quarter than the veteran product, about $7 billion in all.

Far from dumping dated ETFs for newer versions that are cheaper and often track a broader range of securities, Wall Street traders are proving there’s one measure they care about more than any other when it comes to these products: liquidity, and lots of it. And that’s fine with BlackRock, which is looking to compete with the likes of Vanguard Group Inc. and Charles Schwab Corp. for individual investors who want low fees without cannibalizing its most profitable exchange-traded funds.

“It’s all about comfort, and there’s a lot of comfort that comes with names that are trading with the kind of volume and breadth of ownership of EEM,” Chris Hempstead, the head of ETF sales at KCG Holdings Inc. in Jersey City, New Jersey, said in a July 15 interview. EEM is the ticker of BlackRock’s $42 billion emerging-market fund, now the seventh-largest in the world. “People don’t want to have to think too hard about which emerging-market product to choose. They don’t want to have to worry a lot about what they’re getting in to.”

Vanguard’s Cheaper

Developing-nation ETF trading volume has surged to the highest since 2010 in the past year amid investor concern over the end of easy-money policies from central banks and financial instability from Argentina to Turkey. The popularity of the established products shows how money managers are prioritizing ease of access over price and innovation when seeking exposure to economies with attractive growth trends while trying to navigate rising geopolitical tension from Russia to the Middle East.

About 37 million shares, or $1.6 billion, of the older BlackRock Emerging Markets ETF changed hands daily over the last 30 days, fourth-most among exchange-traded products globally. That’s more volume than on any U.S. company besides Apple Inc., and almost 50 times that of its newer counterpart, which has about $5.3 billion in assets.

It’s also more than three times the volume of Vanguard’s FTSE Emerging Markets ETF, whose expense ratio, like the iShares Core MSCI Emerging Markets ETF, is about a quarter the 0.67 percent fee of BlackRock’s flagship fund.

Vanguard’s $49 billion ETF, the fourth-largest in the world, has attracted $2 billion of inflows since March.

State Street

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