Largest Emerging-market ETF Does Not Hold Some of the Biggest EM Stocks

Chinese e-commerce giant Alibaba reported a massive surge in its fourth-quarter revenue earlier this month.

The trend contributed to the strong year-to-date advance in its stock price. This is good news for emerging-market investors — or would be, rather, as many of them may not realize that they’re not actually participating in this growth story.

Hence, Alibaba BABA, -1.14% is the most famous emerging-market company in the world, with a market capitalization of more than $300 billion. Besides, it does not partake in the most popular emerging-market funds on the market.

Moreover, Vanguard’s emerging-market equity index funds, including an exchange-traded fund and a mutual fund, don’t include Alibaba as a holding, while competing funds, including ones from BlackRock’s BLK, +0.02%  iShares suite, do. These funds don’t hold other high-profile emerging-market stocks, including Baidu Inc.BIDU, -1.83% — the Chinese internet company, which has a market capitalization of $65.8 billion — and Sina Corp. SINA, -1.97% China’s $7.1 billion telecom company.

The Vanguard funds are among the most popular way for investors to get exposure to the emerging-market sector. The Vanguard Emerging Markets Stock Index Fund has $72.7 billion in assets, while the Vanguard FTSE Emerging Markets ETF VWO, -0.87%has about $55 billion in assets, making it the largest EM ETF on the market.

Index funds like these simply track an underlying benchmark, holding whatever the index does, and in the same proportion. However, the Vanguard and iShares funds track benchmarks from different index providers, who use their own unique process and criteria for determining the holdings of the index. 

Read more at The Market Watch.