Vanguard’s $39 billion FTSE Emerging Markets ETF, the biggest fund tracking developing-nation stocks, has retreated 19 percent last quarter to the lowest level since 2009. The funds had outflows of $3.4 billion in the past three months.
Emerging-market ETFs have lost 16 percent this year on average, compared with a 5 percent drop in the last three years. Investors pulled money from developing nations in two out of three quarters in 2015, withdrawing a total of $6 billion from developing-nation funds so far in 2015. That’s equal to about 6 percent of the funds’ total market capitalization, the biggest retreat as a percentage of aggregate market capitalization in at least 10 years, data compiled by Bloomberg show.
The MSCI Emerging-Markets Index slid 19 percent last quarter to its lowest closing level in six years as historical volatility, a measure of price swings, reached the highest since 2011. This compares with a 6.9 percent loss in the Standard and Poor’s 500 Index and a 8.9 percent decline in the MSCI World Index, which tracks developed-market stocks.
“If there are other opportunities out there, investors are likely not going to be willing to step into emerging markets,” State Street’s Mazza said. “There’s still a need for a further shakeout in emerging markets, and that might be the catalyst for investors who can’t give up on opportunities out there, but right now we’re not seeing it.”