BlackRock and Vanguard’s emerging-market ETFs part ways as an AI-driven rally lifts some exposures more than others

For more than a decade, investors often treated BlackRock’s iShares emerging-markets offering and Vanguard’s comparable product as close substitutes, given overlapping indices and broadly similar holdings. That assumption is being stress-tested as market leadership swings, according to a report published July 6, 2026.

The divergence, described as exceeding 170% over the period covered by the Bloomberg report, reflects how quickly performance gaps can widen when certain country and sector exposures move sharply out of sync. The report points to a rally tied to artificial-intelligence-linked enthusiasm as one driver behind the broader “tech-and-commodities” style momentum that has lifted select emerging markets faster than others.

Rather than tracking as a simple mirror image, the two ETFs have increasingly separated, the report says, as AI-fueled flows and expectations reshaped what investors wanted inside emerging markets. In practice, even when two funds start from broadly similar mandates, differences in index construction, country weights, and rebalancing can magnify performance dispersion during fast-moving regimes.

The tension is especially relevant because many investors use emerging-market ETFs as a core building block for global diversification. When two widely used funds begin to behave differently, investors may need to revisit whether their holdings still match their intended sources of risk, rather than assuming they are effectively redundant.

BlackRock’s ETF business, centered on the iShares brand, has built much of its scale by offering “index-like” exposures across geographies and themes. Vanguard’s ETF lineup, including its emerging-markets flagship, similarly emphasizes low-cost and straightforward index tracking. In fast markets, however, the practical question becomes less about cost and more about what the index exposure actually is at any given time.

The report frames the split in terms of an AI-fueled rally pushing the composition of returns away from what investors may have seen as a stable baseline. It also highlights a broader market dynamic: when a single narrative concentrates demand, performance differences between otherwise comparable funds can widen quickly.

Still, important details that would help quantify the drivers are not spelled out in the publicly accessible excerpt behind the Yahoo Finance syndication. The report does not, in the portion available here, break down the exact contribution from specific countries or sectors, nor does it provide a full table of holdings changes during the run-up.

For market participants, the near-term watch item is whether the divergence persists as AI-related expectations cool, broaden, or rotate into new exposures within emerging markets. If leadership changes again, funds that have recently separated could converge, but investors seeking consistent exposure may need to confirm index methodology and current factor weights rather than rely on historical similarity.