Why iShares Core MSCI Emerging Markets ETF Can Still Compete

Key Morningstar Metrics for iShares Core MSCI Emerging Markets ETF

• Morningstar Medalist Rating

  : Bronze

• : Average
• : Above Average
• : Above Average

IShares Core MSCI Emerging Markets IMI ETF’s IEMG main strength is its low fee, which makes it a solid option for investors seeking emerging-market equity exposure. That said, the complexities inherent in emerging markets can leave opportunities for the best active managers to add value and limit our conviction in this passive approach.

The fund tracks the performance of the MSCI Emerging Markets Investable Market Index. The index aims to capture large-, mid-, and small-cap equities across 24 emerging-market countries. With more than 3,000 constituents, the index covers approximately 99% of the free-float-adjusted market capitalization in each country. The inclusion of small caps allows for greater diversification and broader exposure.

At the country level, the index has a long-standing allocation to China (20%-30%). Since 2018, the index has included China A-shares. Other major country weightings are India, Taiwan, and South Korea; these top-four countries concentrate approximately 75% of the portfolio in four key emerging markets. In terms of sectors, information technology, financials, consumer discretionary, communication services, and industrials make up about three-fourths of the index.

The recent performance of the MSCI Emerging Markets IMI has varied across different countries. Focusing on its largest country exposures (in US dollar terms), stocks from Korea posted a return of 93%, far outpacing Taiwan stocks’ return of 38% in 2025. Conversely, India returned just 0.4% for the year. China, the largest country in the index with a weight of approximately 25% to 30%, delivered a strong 31.5% return.

All that said, the exchange-traded fund’s broad exposure and competitive fee structure make it an attractive option for investors, but the varying country performances suggest there is room for active managers to add value through more nuanced and flexible approaches; this earns the fund a Process rating of Average.

The fund is managed by BlackRock; the firm’s industry-leading technology, global footprint, and extensive supporting cast earn it an Above Average People Pillar rating.

iShares Core MSCI Emerging Markets ETF: Performance Highlights

This ETF provides broad exposure to emerging-market equities at a low cost.

The strategy is driven by market-cap exposure to a range of highly differentiated markets, whose fortunes are not always closely aligned. The MSCI Emerging Markets IMI’s top country weightings are China, Taiwan, and India.

China has the largest country weighting in the MSCI Emerging Markets IMI at about 20% to 30%, and therefore, it can be a very important driver of performance.

Emerging-market stocks performed strongly in 2025. As proxied by the Morningstar Emerging Markets NR USD Index, they posted higher returns than developed-market equities, as represented by Morningstar Developed Markets NR USD, on an overall and risk-adjusted basis. In absolute terms, returns were about 9% higher. One factor contributing to this performance was the weakness in the US dollar, which has been a tailwind for emerging-market stocks.

The ETF ended 2025 up about 32%, ranking in the top half of the diversified emerging markets Morningstar Category and keeping pace with broader, total non-US equity market indexes. So far in 2026, the ETF’s 15.85% gain through April 30 was ahead of the broader non-US stock market (Vanguard Total International Stock Index Fund ETF VXUS was up 10.1%) and in the middle of the diversified emerging-markets pack.

In this ETF’s portfolio, Taiwan more than offset weak performance in China and India in the year-to-date through April. Taiwan, as measured by the iShares MSCI Taiwan ETF EWT, surged nearly 40% behind Taiwan Semiconductor Manufacturing’s strong artificial intelligence boom-driven performance; the stock was a huge contributor to the ETF’s results. China, as measured by the iShares MSCI China ETF MCHI, fell 4.6% because of trade tensions and uncertainty about domestic demand, while India, as gauged by the iShares MSCI India ETF INDA, dropped 9.5% as stock valuations retreated and earnings growth slowed.

The complexity, market idiosyncrasies (such as the prominence of state-owned enterprises), and breadth of the opportunity set when it comes to emerging markets mean there are often large dispersions in returns between and within markets, conditions that suggest an active rather than passive approach. Active managers’ local expertise, the flexibility to invest in smaller companies, and, in some cases, to allocate to non-emerging-market equities are other aspects that have helped the very best consistently outperform peers.

However, the average emerging-market equities active manager has still struggled to outperform passive peers over long periods despite the aforementioned advantages, according to past editions of Morningstar’s Active/Passive Barometer. The year-end 2025 US Active/Passive Barometer found that about 29% of active managers in the diversified emerging-markets category were able to survive and outperform passive peers over this same decadelong period up to Dec. 31, 2025.