After years of underperformance versus developed markets, emerging markets (EM) are back on ETF investors’ radar in 2025. While the MSCI Emerging Markets Index lost roughly 3.5% between 2020 and 2024, compared with a 57% gain in the MSCI World over the same period, EM equities have rebounded sharply this year, with broad EM benchmarks up more than 28% year-to-date and drawing an estimated US$38.9 billion in ETF inflows.

This shift supports the argument made by manager magazin that broad EM exposure via ETFs can now be a compelling addition to global portfolios, particularly alongside developed-market building blocks such as the MSCI World.

Performance Drivers: China, South Korea and Policy Tailwinds

The rebound has not been uniform. According to analysis from Franklin Templeton, EM leaders such as South Korea and China have powered headline returns, with South Korean equities up about 61% year-to-date and China gaining roughly 37%. These markets have benefited from a weaker US dollar, targeted policy support and relatively stronger growth prospects than many developed peers.

Many EM equity ETFs tracking the MSCI Emerging Markets or similar indices have participated in this move, helping investors diversify away from the US mega-cap growth concentration in global benchmarks. The renewed interest also reflects a broader shift in global ETF flows: European ETF inflows reached a record US$207.3 billion in early 2025, with growing allocations to global and EM products, according to a report on retail-driven flows by FN London.

New EM ETF Launches Expand Investor Toolkits

The product landscape is also evolving rapidly. In June 2025, Harbor Capital launched the actively managed Harbor Emerging Markets Equity ETF (EPEM), adding to the menu of stock-picking strategies that aim to exploit dispersion across countries and sectors. While specific fund metrics such as expense ratio, assets under management (AUM) and trading volume vary by product, investors should weigh costs, liquidity and tracking profile carefully against more established, low-cost EM index ETFs.

On the risk-managed side, buffered outcome strategies are entering the EM space as well. The First Trust EM Buffer ETF (TMAR), tied to the performance of the widely followed iShares MSCI Emerging Markets ETF (EEM), offers capped upside in exchange for a predefined downside buffer, according to ETF Express. These structures may appeal to investors seeking EM participation with some protection against sharp drawdowns.

The breadth of choice is expanding fast. FactSet reports that 245 new ETFs came to market in the first quarter of 2025 alone, a 66% increase versus the same period in 2024. That competitive backdrop is pushing issuers to innovate across active EM mandates, factor-based strategies and structured outcome products.

For investors and advisors building globally diversified portfolios, the emerging markets segment is regaining strategic relevance after a long lull. Pairing core MSCI World exposure with a dedicated EM sleeve—via broad index trackers, selective active ETFs like EPEM, or risk-managed products such as TMAR—can help rebalance geographic concentration and potentially capture higher long-term growth. With flows and performance momentum now tilting back toward EM, the coming quarters may be decisive in determining whether this rebound marks a cyclical bounce or the start of a more durable leadership shift.