⚠️ EC² Invest can make mistakes. Please double check information in this report.

iShares MSCI Emerging Markets ETF

EEM:NYSE

equity ETF | passive | iShares | Tracks MSCI

Market Price

US$59.17 (26 Jan 2026)

+37.76% (YoY)

NAV

US$58.66

+0.87% Premium

Yield

2.22%

-12.77% (YoY)

Expense Ratio

0.72%

+157% vs Avg: 0.28%

Box Set (ETF)

⚡ Executive Summary

📊 The Bottom Line

This ETF tracks the MSCI Emerging Markets Index, providing broad exposure to large and mid-capitalization companies across emerging market countries. It offers a diversified approach to capture long-term growth from developing economies. The fund's passive strategy and established history make it a standard choice for this segment. Bull case projects a market price of US$70.99 (+20%) while the bear case suggests US$47.34 (-20%) over the next 12-18 months.

⚖️ Risk vs Reward

The underlying emerging market equities trade at a P/E of 17.37x, which is relatively attractive compared to developed markets but reflects inherent risks. Emerging markets have shown strong performance recently with EEM up 4% YTD in 2026, benefiting from global recovery and technology growth. However, geopolitical tensions, currency fluctuations, and slower growth in major emerging economies like China present headwinds. The ETF's current premium to NAV is minor, but its expense ratio is higher than some newer, lower-cost competitors, introducing a cost drag over time. The upside potential is tied to sustained global growth and stability in developing nations, balanced against significant macroeconomic and political uncertainties.

🚀 Why EEM Could Soar

• Strong global economic rebound: Accelerating global growth could boost demand for emerging market exports and commodities, driving corporate earnings.
• Favorable demographics and rising consumption: Expanding middle classes and young populations in emerging markets support robust domestic consumption growth.
• Technology sector leadership: Significant exposure to innovative technology companies within emerging markets could continue to drive strong returns.

⚠️ What Could Go Wrong

• Geopolitical instability: Heightened trade tensions or regional conflicts could severely impact investor confidence and capital flows into emerging markets.
• Currency depreciation: A stronger U.S. dollar could devalue emerging market assets for U.S. investors and increase debt burdens for foreign companies.
• Slower growth in China: Economic deceleration in China, a major component of the index, could weigh heavily on the overall emerging market performance.

🏢 Fund Overview

What Are You Actually Buying

The emerging markets asset class comprises economies in various stages of development, characterized by rapid growth, industrialization, and increasing integration into the global economy.
These markets offer exposure to a diverse range of companies, from established leaders in technology and financials to growing consumer and industrial businesses.
Investing in emerging markets can provide diversification benefits and potential for higher long-term growth compared to developed markets, driven by demographic trends and economic reforms.

Market Dynamics & Outlook

Emerging markets have shown positive momentum, with EEM up 4% year-to-date in 2026, reflecting renewed investor interest and a recovering global economy.
The sector benefits from secular trends such as urbanization, infrastructure development, and digital transformation in rapidly developing nations.
However, market dynamics are heavily influenced by global interest rates, commodity prices, and the economic policies of major developed nations.

🎯 Why This Matters

Understanding the emerging markets landscape is crucial for investors seeking growth and diversification, as these economies represent a significant and expanding portion of the global GDP. However, the inherent volatility and geopolitical sensitivities demand a nuanced approach to risk management.

📈 Valuation & Analysis

Historical Performance

YTD

+4.00%

+37.76%

Yearly Growth (3Y)

+15.80%

Yearly Growth (5Y)

+3.50%

Yearly Growth (10Y)

+7.73%

Yearly Growth (Since Inception)

+9.29%

Current Valuation

The iShares MSCI Emerging Markets ETF (EEM) holds underlying equities trading at an aggregate trailing Price-to-Earnings (P/E) ratio of 17.37x, with a Price-to-Book (P/B) ratio of 2.24x. This valuation is slightly above its longer-term historical averages but remains generally attractive when compared to the higher valuations seen in many developed equity markets. The current dividend yield stands at 2.05%. While the P/E ratio of 17.37x reflects the growth potential embedded in these markets, it also incorporates the geopolitical and economic risks unique to emerging economies. Historically, emerging markets tend to trade at a discount to developed markets, and the current valuation suggests a fair, though not deeply discounted, entry point for investors seeking exposure to this asset class.

The Bull Case - Upside to

Robust Global Economic Recovery

Medium Probability

A stronger-than-expected rebound in global economic activity could drive higher demand for exports from emerging market nations, potentially boosting corporate revenues by 10-15% and lifting the ETF's NAV by approximately 15-20% over 12-18 months.

Easing Inflationary Pressures & Rate Cuts

Medium Probability

Successful containment of global inflation could lead to earlier and more significant interest rate cuts by central banks, stimulating capital flows into higher-growth emerging markets and potentially expanding valuations by 10-15%, adding 10-15% to NAV.

Stronger Commodity Prices

Low Probability

Increased demand from industrializing emerging economies could bolster commodity prices, benefiting resource-rich countries and companies within the index, potentially contributing an additional 5-8% to the ETF's NAV.

The Bear Case - Downside to

Geopolitical Escalations

Medium Probability

Increased geopolitical tensions, particularly in Asia or Eastern Europe, could trigger significant capital outflows, currency devaluations, and market uncertainty, leading to a potential 20-25% decline in the ETF's NAV.

Slower-than-Expected China Growth

Medium Probability

A prolonged economic slowdown in China, coupled with structural issues, could significantly dampen overall emerging market growth prospects, given its substantial weighting, potentially reducing the ETF's NAV by 10-15%.

U.S. Dollar Strength and Capital Flight

Medium Probability

A sustained strengthening of the U.S. dollar could increase the debt burden for emerging market countries and companies, while also attracting capital away from these markets, resulting in a potential 10-12% drag on returns.

Risk/Reward Assessment

The iShares MSCI Emerging Markets ETF presents a balanced risk-reward profile, with considerable upside tied to a robust global economic recovery and potential for easing monetary policies. Should these favorable conditions materialize, the diversified exposure to growing emerging economies could yield significant returns. However, investors must contend with an elevated risk of geopolitical instability, which historically has led to sharp corrections in emerging markets. Furthermore, the substantial influence of China's economic trajectory and the sensitivity to U.S. dollar strength introduce additional layers of risk. While a bull case scenario could see the ETF's price appreciate by approximately 20%, a confluence of negative factors could result in a downside of 20% or more. This necessitates a long-term investment horizon and a high tolerance for volatility to potentially capitalize on the growth opportunities while mitigating the inherent risks.

Peer Comparison

EEM offers broad exposure to emerging markets, a category known for its high growth potential alongside elevated risk. While EEM has a longer track record and substantial AUM, making it highly liquid, its expense ratio is notably higher than many direct competitors. Newer, lower-cost alternatives like VWO and IEMG provide similar exposure at a significantly reduced cost, which can compound savings over the long term. SCHE also offers a very competitive expense ratio. Investors prioritizing a long history and high liquidity might prefer EEM, but those focused on cost-efficiency for core emerging market exposure should consider its lower-cost peers. EEM's dividend yield is competitive within the category.

Fund	Expense Ratio	AUM (B)	1Y Return	3Y Return	5Y Return	Yield
Vanguard FTSE Emerging Markets ETF (VWO)	0.07%	US$105.4B	25.58%	9.35%	4.74%	0.02%
iShares Core MSCI Emerging Markets ETF (IEMG)	0.09%	US$135.4B	32.10%	4.60%	4.60%	0.03%
Schwab Emerging Markets Equity ETF (SCHE)	0.07%	US$12.0B	28.40%	N/A	N/A	0.03%

🎯 Why This Matters

The valuation and peer comparison highlight that while EEM offers an established route to emerging markets, its higher expense ratio compared to several direct competitors is a significant consideration for long-term investors. The choice between EEM and its peers largely depends on an investor's preference for historical liquidity versus cost efficiency and index methodology nuances.

📊 Appendix

Top 10 Holdings (80+ of ETF Value)

#	Ticker	Logo	Name	Sector	Weight
1	2330	T	Taiwan Semiconductor Manufacturing Co Ltd	Technology	0.1%
2	005930	S	Samsung Electronics Co Ltd	Technology	0.0%
3	0700	T	Tencent Holdings Ltd	Communication Services	0.0%
4	9988	A	Alibaba Group Holding Ltd	Consumer Cyclical	0.0%
5	000660	S	SK Hynix Inc	Technology	0.0%
6	HDFCBANK	H	HDFC Bank Ltd	Financials	0.0%
7	939	C	China Construction Bank Corp H	Financials	0.0%
8	RELIANCE	R	Reliance Industries Ltd	Energy	0.0%
9	2317	H	Hon Hai Precision Industry Ltd	Technology	0.0%
10	1810	X	Xiaomi Corp	Technology	0.0%

Fund Mechanics

How It Works

The iShares MSCI Emerging Markets ETF (EEM) aims to track the investment results of the MSCI Emerging Markets Index, a benchmark composed of large- and mid-capitalization equities from emerging market countries globally. As a passively managed index fund, EEM seeks to replicate the performance of its underlying index by typically investing at least 80% of its assets in the component securities of the index and in investments with substantially identical economic characteristics. This methodology provides broad, diversified exposure to emerging market equities without attempting to outperform the market through active stock selection. The MSCI Emerging Markets Index is market-capitalization weighted, meaning companies with larger market values have a greater influence on the index's performance. The index is reconstituted and rebalanced periodically to reflect changes in market capitalization, free float, and country classifications, ensuring it remains representative of the evolving emerging market universe. EEM's strategy involves holding a representative sample of the index's securities or all of them, depending on the fund's management approach, to minimize tracking error.

Holdings Breakdown

Number of Holdings

1214

Top 10 Concentration

3179.0%

Turnover Rate

900%

Category	Weight	Description
Information Technology	29.8%
Financials	21.3%
Consumer Discretionary	11.5%
Communication Services	8.9%
Materials	7.5%
Industrials	7.0%
Energy	3.7%
Consumer Staples	3.5%
Health Care	3.0%
Utilities	2.2%
Real Estate	1.3%
Cash and/or Derivatives	0.3%

Cost Efficiency

Expense Ratio

0.72%

Median Bid-Ask Spread

0.020%

Metric	1 Year	3 Year	5 Year
Tracking Error	N/A	N/A	N/A
Tracking Difference	-23.00%	-46.00%	-70.00%

Performance History

Year	ETF Return	Benchmark Return	Tracking Diff	Volatility	Max Drawdown	Sharpe Ratio
2025	33.34%	33.57%	-0.23%	N/A	N/A	N/A
2024	6.94%	7.50%	-0.56%	N/A	N/A	N/A
2023	8.90%	9.83%	-0.93%	N/A	N/A	N/A
2022	-20.55%	-20.09%	-0.46%	N/A	N/A	N/A
2021	-3.72%	-2.54%	-1.18%	N/A	N/A	N/A
2020	17.56%	18.31%	-0.75%	N/A	N/A	N/A
2019	18.20%	18.42%	-0.22%	N/A	N/A	N/A
2018	-15.31%	-14.57%	-0.74%	N/A	N/A	N/A

Annualized Return Since Inception

9.29%

Detailed Peer Comparison

Ticker	Name	Issuer	Exp Ratio	AUM (B)	1Y	3Y	5Y	Yield	StdDev 3Y	Sharpe 3Y	Spread
VWO	Vanguard FTSE Emerging Markets ETF	Vanguard	0.07%	US$105.4B	25.6%	9.3%	4.7%	0.02%	N/A	N/A	N/A
IEMG	iShares Core MSCI Emerging Markets ETF	iShares	0.09%	US$135.4B	32.1%	4.6%	4.6%	0.03%	N/A	N/A	N/A
SCHE	Schwab Emerging Markets Equity ETF	Schwab	0.07%	US$12.0B	28.4%	N/A	N/A	0.03%	N/A	N/A	N/A
EEM ⭐	iShares MSCI Emerging Markets ETF	iShares	0.72%	US$25.1B	37.8%	15.8%	3.5%	0.02%	0.16%	N/A	0.020%
Category Average			0.28%	—	30.9%	9.9%	4.3%	0.03%	—	N/A	—

Risk Metrics

Beta

0.69

R-Squared

0.58

Standard Deviation

1 Year	3 Years	5 Years	10 Years
0.18%	0.16%	0.18%	N/A

Sharpe Ratio

1Y	3Y	5Y	10Y
N/A	0.90	N/A	N/A

Sortino Ratio

3 Years	5 Years
N/A	N/A

Maximum Drawdown

1 Year	3 Years	5 Years	Since Inception
-0.18%	N/A	-0.24%	-0.34%

Correlations

S&P 500

0.69

Liquidity & Trading

Volume

Avg Daily Shares

28,026,442

Avg Daily Dollar Volume

US$1658.4M

Trend

stable

Bid-Ask Spread

Metric	Value
Median (Percent)	0.020%
Median (Dollar)	N/A
During Hours	N/A
At Close	N/A
Volatility	low

Premium/Discount to NAV

Metric	Value
Current	0.87%
30-Day Average	N/A
1-Year Average	N/A
Standard Deviation	N/A
Max Premium (1Y)	N/A
Max Discount (1Y)	N/A

Creation/Redemption Activity

Trend

string

Net Flows

Period	Net Flow

⚠️ Disclaimer: This ETF research report is for informational and educational purposes only. It does not constitute investment advice, a recommendation, or an offer to buy or sell securities. EC² Invest is not a registered investment advisor. All data is sourced from public sources and may contain errors. Past performance does not guarantee future results. ETF investing involves risk, including possible loss of principal. Always conduct your own research and consult with a qualified financial professional before making investment decisions.