The shift towards passive investing, evident across most asset classes, has come into focus in emerging equities, which have enjoyed a sparkling 60 percent rally since early-2016. But the sector may also illustrate the concentration risks that exchange-traded funds can bring to portfolios.
Emerging equity funds have received some $56 billion so far this year, Lipper data shows. Of this, $23 billion went into ETFs.
Investors are keen on tech companies which are making profits by disrupting the status quo in sectors from media and advertising to retail and industrials.
But the dependence on technology for returns is causing some discomfort among investors who prefer shares in emerging market car or beverage makers for instance for exposure to consumer demand in the developing world.
Ed Kerschner, chief portfolio strategist at Columbia Threadneedle, says the tech companies' performance mostly reflects that of their U.S. peers rather than providing exposure to developing countries.
"The question is are you buying emerging markets or are you buying technology?" Kerschner said. "The risk of buying EM benchmarks is that you are not diversifying away from the S&P."
As a result of the tech rally, the conventional market-cap weighted emerging equity index, with bigger weightings in companies with the largest market caps, has begun strongly outperforming the index where all companies are assigned the same weighting.
The success can also be reversed. Any faltering by the tech leaders would have a proportionally weighty effect on ETFs, potentially spurring big outflows.
Scott Snyder, co-portfolio manager of the ICON emerging markets fund, estimates that the four biggest tech firms have accounted for a third of 2017's emerging equity returns.
"A lot of people that might just be piling into passive strategies in EM could be overly exposed to technology right now," ICON's Snyder said.