IEMG and VWO are the two largest emerging markets ETFs, together holding over $150 billion in assets. They provide exposure to the same general thesis — growth in developing economies — but their indexes classify the world differently in one critical way.
The South Korea Question
IEMG tracks the MSCI Emerging Markets Investable Market Index, which classifies South Korea as an emerging market (~12-15% of the fund). VWO tracks the FTSE Emerging Markets Index, which classifies South Korea as developed (0% of the fund). This single classification difference is the primary distinction between the two funds.
South Korea is home to Samsung, Hyundai, and SK Hynix — major global corporations. Including or excluding these companies meaningfully affects the fund's sector exposure and performance. Compare the holdings at IEMG vs VWO comparison page.
Other Differences
IEMG holds over 2,700 stocks (including small caps due to its "Investable Market" scope) versus VWO's roughly 4,800 stocks. Despite VWO's larger stock count, IEMG's inclusion of South Korean companies often gives it better diversification from a country perspective. Both have heavy China exposure (25-35%), India exposure (15-20%), and Taiwan exposure (15-20%).
Fees and Tracking
VWO charges 0.08%; IEMG charges 0.09%. The difference is trivial. Both use sampling rather than full replication given the thousands of underlying securities. Tracking quality is comparable from both Vanguard and iShares.
Which to Choose
If your developed-market allocation already covers South Korea (via a FTSE-based international fund), use VWO to avoid double-counting. If your developed allocation uses MSCI-based funds (which exclude South Korea from developed), use IEMG to ensure South Korea coverage. Consistency with your other international fund's index family is the deciding factor. Learn more at our education center.
