Vanguard FTSE Emerging Markets ETF: July 2026 update

• Vanguard is a pioneer in index investing and launched its first ETF in 2001

• This ETF offers exposure to a range of countries and sectors across emerging markets

• It has tracked the FTSE Emerging Index closely since launch

How it fits in a portfolio

An ETF is a basket of investments that often includes company shares or bonds. They tend to track the performance of an index such as the FTSE Emerging Index and trade on stock exchanges, like shares. This means that their price fluctuates throughout the day.

Find out more about ETFs

The Vanguard FTSE Emerging Markets ETF invests in large and medium-sized companies in emerging markets. These markets are higher risk as they're at an earlier stage of development, so this ETF should be considered only for a portfolio with a longer investment outlook that can accept periods of high volatility.

An ETF is one of the simplest ways to invest and can be a low-cost starting point for an investment portfolio aiming to deliver long-term growth. ETFs that track emerging markets could be used to diversify a global portfolio, including those focused on developed markets.

Manager

Vanguard is a pioneer when it comes to index investing, having created the first retail index fund in 1976. It now runs some of the largest index funds and ETFs in the world. Given its size, it has a big investment team with the expertise and resources to help its ETFs track indices and markets as closely as possible, while having the scale to keep costs down.

Vanguard ETFs are run by a large, global team. They’re spread across three investment hubs around the world – the US, UK and Australia. This team-based approach means that there’s no named manager on the ETF. Vanguard has run this ETF since 2012.

Vanguard also has a trading analytics team, which is responsible for ensuring the ETFs buy and sell investments efficiently and at a competitive cost. This involves analysing data from different brokers and banks. Lower costs should help the ETFs track their benchmarks as tightly as possible.

Process

This ETF aims to track the performance of emerging markets, as measured by the FTSE Emerging Index. It does this by investing in most of the companies in the index and in similar proportions. This is known as partial replication and can help the ETF track the index closely without the need to buy all the smaller companies in the index, which can be more difficult and costly to trade.

The ETF currently invests in 2,306 companies. A large amount is invested in Taiwan, China and India, which made up 33.8%, 26.1% and 16.0% of the ETF, respectively at the end of June 2026. Taiwan's weighting has increased over the past year and is now larger than both China and India. South Korea isn’t included in this ETF’s benchmark but is included in some other emerging market indices. Key sectors include technology, financials and consumer discretionary.

Reducing costs is a key part of keeping the difference in performance between the ETF and the benchmark to a minimum. In any ETF, factors like taxes, dealing commissions and spreads, and the cost of running the ETF all drag on performance. To help keep these costs down, the team aims to make large investments in companies instead of lots of small transactions.

Vanguard will also lend some of the investments in the ETF to other providers in exchange for a fee, which can be used to offset some of the costs. It will lend securities to only a limited number of high-quality approved dealers. Vanguard indemnifies the fund against any loss from this process, meaning that there should be no negative impact on investors. However, stock lending adds risk.

As this ETF is listed offshore, investors are not usually entitled to compensation from the UK Financial Services Compensation Scheme.

Culture

Vanguard is one of the largest asset managers in the world and manages around $12trn of assets globally. The group aims to put the client at the forefront of everything it does, which drives its focus on quality, low-cost index products.

John Bogle founded Vanguard in 1975, and it’s owned by investors. This allows Vanguard to redirect its profits to investors in the form of lower fees, instead of paying dividends to external shareholders. Bogle believed in creating products that simply track the performance of a market rather than taking a shot at picking individual companies, which may beat them.

The team running this ETF works closely with other equity research and risk departments across the business. They have daily and weekly meetings to discuss ongoing strategy, providing support and challenge on how to run the ETF effectively.

ESG Integration

Vanguard is predominantly an index fund house. Although it has offered exclusions-based index funds for many years, it has lagged peers in offering index funds that explicitly integrate Environmental, Social and Governance (ESG) criteria by tracking indices that tilt towards companies with positive ESG characteristics, and away from those that don’t.

Vanguard’s Investment Stewardship team carries out most of the firm’s voting and engagement activity. Its stewardship activity is grounded in the firm’s four principles of good governance: board composition and effectiveness, board oversight of strategy and risk, executive pay and shareholder rights.

The Investment Stewardship team produces frequent insights on their engagement activity at both a corporate and governmental level. Investors can also access fund-by-fund proxy voting records, although voting rationales are not provided. That said, voting and engagement case studies can be found in the firm’s annual Investment Stewardship report and quarterly Engagement and Voting reports.

Vanguard courted controversy in 2022 when it left the Net Zero Asset Managers’ Initiative, a group of asset managers that have committed to achieving net zero carbon emissions by 2050. It claimed its decision would improve clarity for investors and allow it to speak independently. We view this as a disappointing backward step. Furthermore, in 2024 and 2025, it was reported that Vanguard failed to support a single shareholder proposal requiring more action from investee companies on environmental and social matters.

The Vanguard FTSE Emerging Markets ETF tracks an index that doesn’t specifically integrate ESG considerations into its process. The ETF can therefore invest in shares issued by companies in any sector in line with the benchmark.

Cost

In October 2025, Vanguard reduced this ETF’s ongoing annual fund charge from 0.22% to 0.17%.

The annual charge to hold ETFs in the HL Stocks & Shares ISA, SIPP or Fund & Share Account is 0.35% (capped at £150 p.a. in each account) and 0.25% in the HL Lifetime ISA (capped at £45 p.a.). There are no charges from HL to hold ETFs within the HL Junior ISA. As ETFs trade like shares, both a buy and sell instruction will be subject to the HL share dealing charges.

Learn more about the difference between ETFs and index tracker funds

Performance

Since launch in May 2012, this ETF has tracked the FTSE Emerging Index well, returning 173.7%* versus 197.1% for the index. As is typical of ETFs, it has fallen behind the benchmark over the long term because of the costs involved in running the ETF. However, the tools used by the managers have helped to keep performance close to the index. Remember, past performance isn’t a guide to future returns.

Over the past 12 months, the ETF has done a good job of tracking the index and has risen 26.6%. Taiwan’s stock market significantly contributed to the ETF’s overall returns, driven by its technology sector. It is home to world-leading semiconductor giant Taiwan Semiconductor Manufacturing Company (TSMC), which has benefited from strong demand for chips powering Artificial Intelligence (AI) tools. This has boosted the company’s profits and share price. TSMC is the largest company in the index and made up 17.3% of the ETF at the end of June 2026.

On the other hand, India detracted the most from the ETF’s performance. Foreign investors withdrew a record amount from the Indian market in 2025, and this trend has continued in 2026, putting pressure on share prices. Concerns that the market was too expensive, combined with investors favouring more technology-focused markets, have made India less attractive to investors.

Emerging market ETFs that track benchmarks that don’t include Korea, like this one, have lagged those that include it over the last year. As Korea has performed so strongly, this difference in performance has been larger than we’d usually expect.

Given Vanguard’s size, experience and expertise running ETFs, this ETF should continue to track the index closely in future, though there are no guarantees.