The MSCI Emerging Markets Index added 0.1 percent to 1,079.57 at 2:52 p.m. in New York.
It’s not just in emerging markets where liquidity is paramount. Traders turned to State Street Corp.’s $169 billion SPDR S&P 500 ETF Trust when they wanted to pile $4.2 billion back into U.S. stocks in the three months through June, lured by average daily volume of $17.4 billion. Cheaper challengers from BlackRock and Vanguard with a fraction of the trading garnered about half the inflows.
And BlackRock’s $6.9 billion iShares Gold Trust hasn’t been able to dislodge State Street’s more liquid $34 billion SPDR Gold Shares ETF among traders, despite charging about half as much for management.
Different Customers
BlackRock’s developing-nation products, including the iShares MSCI Emerging Markets Minimum Volatility fund, are designed to target distinct ETF users, according to Daniel Gamba, the head of the New York-based company’s institutional exchange-traded fund business in the Americas.
“Each of these products serves a different clientele,” Gamba said in a July 15 telephone interview. “EEM is really directed toward the high frequency, more experienced user of ETFs. We have seen very little evidence of cannibalization.”
Lower execution costs are also prompting tactical traders who enter and exit bets frequently to favor funds with higher volume, according to Todd Rosenbluth, director of mutual fund and ETF research at S&P Capital IQ.
BlackRock’s newer emerging-market ETF has an average bid- ask spread of 2.8 basis points, compared with 2.3 for that of its larger predecessor.
“It’s not just the expense ratio that’s important, but other cost factors that are playing a role for investors,” Rosenbluth said in a July 14 phone interview from New York. “The bid-ask spread is tighter for EEM, which is important if your time horizon is short and you’re trading in and out of the ETF.”
Familiarity with the product and convenience also play a role for investors, he said.