The Avantis Emerging Markets Equity ETF (AVEM) delivered a 35% return in 2025, surpassing Vanguard’s top funds with $15.1 billion in assets. Dollar weakness drove the outperformance, as a 9% decline made emerging markets more appealing. The fund’s heavy focus on Asian tech and financials propelled gains, but 2026’s potential remains uncertain.

AVEM’s success hinges on dollar strength and China’s economic trajectory in 2026. Dollar weakness benefits emerging markets, while AVEM’s exposure to Chinese tech giants makes it sensitive to Beijing’s policy decisions. The fund’s semiconductor-heavy holdings could lead to volatility if the cycle turns or supply chain disruptions occur.

Taiwan Semiconductor constitutes 6.35% of AVEM’s portfolio, with a significant semiconductor exposure driving 2025’s gains. However, geopolitical risks involving Taiwan and shifts in U.S.-China tech policies pose threats. Monitoring AVEM’s semiconductor weighting and staying informed on global trade dynamics are crucial for investors.

For a different approach, consider the iShares Core MSCI Emerging Markets ETF (IEMG) offering deeper liquidity and lower fees. AVEM’s active management style contrasts with IEMG’s passive approach, with the former favoring smaller, undervalued stocks. Whether AVEM’s strategy continues to pay off in 2026 depends on market factors like value and size trends.

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Read more at Yahoo Finance: One Avantis ETF Beat Vanguard’s Biggest Funds in 2025 and Could Keep Running in 2026