BlackRock's iShares Core MSCI Emerging Markets ETF (IEMG) has significantly outperformed Vanguard's FTSE Emerging Markets ETF (VWO) year-to-date through mid-May 2026, with IEMG up approximately 16 percentage points more than VWO. This performance divergence stems almost entirely from South Korea's market classification.

MSCI designates South Korea as an emerging market, allowing IEMG to hold over 12% in South Korean equities, including major memory chip producers like Samsung Electronics and SK Hynix. These companies have benefited immensely from AI infrastructure demand, propelling the KOSPI index as a top global performer. In contrast, FTSE reclassified South Korea as a developed market in 2009, meaning VWO holds no South Korean stocks.

MSCI's recent