In this episode of the “ETF of the Week” podcast, VettaFi’s Head of Research, Todd Rosenbluth, joined Chuck Jaffe of Money Life to discuss the Vanguard Emerging Markets Ex-China ETF (VEXC). Their conversation delved into various aspects of the fund, providing investors with valuable insights.
Chuck Jaffe: One fund, on point for today. The expert to talk about it. This is the ETF of the Week!
Welcome to the ETF of the Week, where we explore trending, new, and intriguing exchange-traded funds with Todd Rosenbluth, the head of research at VettaFi. For tools and research to enhance your ETF investing, visit VettaFi.com.
Todd Rosenbluth, it’s great to chat with you again.
Todd Rosenbluth: Great to be back, Chuck.
Chuck Jaffe: Your ETF of the Week is…
Todd Rosenbluth: The Vanguard Emerging Markets Ex-China ETF, VEXC.
Chuck Jaffe: VEXC, the Vanguard Emerging Markets Ex-China ETF. This is indeed new and newsworthy, having launched just a week ago. Why this fund right out of the gate?
Todd Rosenbluth: Exactly! This fund debuted at the end of September. Excluding China from an ETF is not a novel idea; iShares has been a leader in this space. What excites me about VEXC is its pairing with the Vanguard Emerging Markets ETF (VWO), which is a $100 billion ETF.
VEXC is incredibly affordable at just seven basis points. Vanguard typically launches fewer ETFs, focusing more on actively managed fixed income products lately. So, this new offering caught my attention.
Chuck Jaffe: Let’s discuss portfolio construction. Is VEXC essentially VWO minus Chinese stocks?
Todd Rosenbluth: Yes, that’s correct! China constitutes about a third of VWO’s assets. VEXC excludes all Chinese stocks, increasing the weight of Taiwanese, Indian, and South African stocks.
If you’re concerned about China’s role in your portfolio, VEXC can serve as a replacement for VWO, allowing you to eliminate exposure to China.
Moreover, investors often pair ex-China ETFs with broader emerging market funds to reduce their overall exposure to China.
Chuck Jaffe: I recall you mentioning that ex-China funds had fallen out of favor due to underperformance. How does VEXC fit into that narrative?
Todd Rosenbluth: Indeed, money has flowed out of ex-China ETFs this year, particularly the iShares product. However, VEXC offers a way to control exposure to emerging markets at a lower cost.
If you believe China will underperform, VEXC is a sensible choice for maintaining exposure to other emerging markets.
Chuck Jaffe: Given your preference for active management, how does VEXC fit into a portfolio that includes active managers?
Todd Rosenbluth: VEXC can complement an active strategy by providing a low-cost, index-based approach to reduce exposure to China.
This fund is ideal for those wanting to limit their exposure to China while still investing in emerging markets.
Chuck Jaffe: What about external factors like trade wars? Is VEXC sensitive to tariffs?
Todd Rosenbluth: While the Chinese stock market has performed well despite tensions, VEXC offers a low-cost way to manage exposure to China.
Chuck Jaffe: Todd, thanks for highlighting the attractive elements of VEXC, the ETF of the Week!
Todd Rosenbluth: Sounds great, Chuck.
Chuck Jaffe: The ETF of the Week is a collaboration between VettaFi and Money Life with Chuck Jaffe. Check out my weekday podcast at MoneyLifeShow.com.
For more information on ETFs, visit VettaFi.com. Follow them on X at @Vetta_Fi and Todd Rosenbluth at @ToddRosenbluth.
Join us every Thursday for the ETF of the Week. Until next time, happy investing!
Note: This article was created with AI assistance and thoroughly reviewed by the author.
For more news and strategies, visit the Fixed Income Content Hub.
