Strength in iShares MSCI Emerging Markets ETF's People Pillar is partially offset by an Average Process Pillar rating, leading to a Morningstar Medalist Rating of Neutral. The portfolio maintains a cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy merits an Average Process Pillar rating. The strategy’s management team earns an Above Average People Pillar rating. The strategy's parent organization earns the firm an Above Average Parent Pillar rating. People, Process and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

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The MSCI Emerging Markets Index is a free-float-adjusted, market-cap-weighted index covering large- and mid-cap companies in 24 emerging markets. With around 1,400 constituents as of December 2023, the index covers approximately 85% of the readily available shares in each representative country. The index is reviewed quarterly. Components must meet minimum criteria for liquidity, minimum free-float-adjusted market cap, and foreign ownership, as well as a waiting period for newly listed stocks.

In June 2017, MSCI decided to add China A-shares to its global equity indexes, including the MSCI Emerging Markets Index. The partial addition of China A-shares was initiated in May 2018 and will gradually increase. Assuming the full addition of China A-shares, China's weight in the MSCI Emerging Markets Index will hover around 40%.

Outside of the increased China inclusion, the MSCI Emerging Markets Index universe has been undergoing a series of other additions and subtractions over the past few years. Saudi Arabia (and the world's largest IPO, Saudi Aramco) and Argentina were included in 2018, only for Argentina to be dropped again after review in June 2021. More recently, Russia has also been stripped of its emerging-markets status, effectively removing its 2% exposure from the index. While inclusion events can sometimes offer the potential for many event-driven alpha opportunities (particularly around index inclusion), they mostly remain as tail risks for passive investors when considering the index's cap-weighted approach to investing. 

Approximately half of the portfolio is concentrated in China, India, Taiwan, and South Korea, with China alone accounting for nearly a third. In terms of sectors, there's a pronounced tilt toward information technology and financials, each capturing about 15% to 25% of the portfolio. Consumer discretionary and communication services also make up significant portions. At the stock level, the portfolio is relatively diversified, with the top 10 names constituting 20% to 30% of the overall holdings, reflecting a balanced approach to individual stock exposure.

Note: The Process Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a vehicle that follows a given strategy (as codified by Morningstar’s StrategyID data point) Morningstar maps the covered vehicle’s Process Pillar to any other uncovered vehicles that follow the same strategy (that is, share the same StrategyID). This ensures that the analyst’s view is leveraged whenever available and promotes consistency when assigning Process Pillar ratings to vehicles that follow the same strategy.

Average

Process

BlackRock's industry-leading technology, global footprint, and extensive supporting cast earn an Above Average People Pillar rating.

The team employs BlackRock's Aladdin platform to fulfill much of its portfolio management tasks, and global trading desks allow traders to conduct foreign transactions in a cost-effective way. 

The London-based European team is headed by Sid Swaminathan, who took charge in February 2022. His service with the firm dates to 2005, including his years with BGI. Manus Stapleton and Mark Stephenson jointly lead the emerging-markets exposures at BlackRock. This year, Stephenson marked a significant milestone, celebrating his 40th anniversary with the firm. This highlights the extensive experience and long-standing tenure of the leadership team.

Meanwhile, Australia-domiciled funds are managed by the Asia-ex-Japan team based in Hong Kong. Jane Kim, who has been with the firm since 2016, replaced Derek Dei as the team head in March-April 2023. Kim has been a key member of the team since she joined in 2016 and had already taken up leadership responsibilities as part of the transition even before Dei left. The seven-member is responsible for the management of over 65 index and ETF products across the Asia-Pacific region. Although the headcount has reduced over the past year, the team is comfortably placed in terms of experience levels and capacity.

As a standard industry practice, the funds are managed on a team basis. This is to ensure that portfolio managers' absences and departures have no effect on day-to-day fund management. Trading activities are facilitated by BlackRock's trading and liquidity strategy group. 

While the breadth of responsibility is large, the team is well supported by iShares' extensive internal index research group and centralized dealing desk and leverages BlackRock’s ubiquitous Aladdin system, its proprietary portfolio management tool. Given the cross-training of the managers across strategies and the highly integrated proprietary systems at BlackRock, we expect the strategies to continue to meet their objective of closely tracking the respective indexes.

Note: The People Pillar rating and analysis are indirectly assigned by an analyst. When an analyst covers a vehicle that follows a given strategy (as codified by Morningstar’s StrategyID data point), Morningstar maps the covered vehicle’s People Pillar ratings to any other uncovered vehicles that follow the same strategy (that is, share the same StrategyID). This ensures that the analyst’s view is leveraged whenever available and promotes consistency when assigning People Pillar ratings to vehicles that follow the same strategy.

Above Average

People

BlackRock offers compelling options across asset classes and vehicles. It earns an Above Average rating for Parent. 
The firm’s approximately USD 8 trillion in assets under management, as of Sept. 30, 2022, gives it unparalleled scale and influence. It is a market-leading index fund provider globally, and its iShares exchange-traded fund franchise offers a low-cost lineup of core funds that investors can use to build a well-diversified portfolio for dirt cheap. The firm can be more adventurous in its ETF launches than some peers, so not everything it launches is appropriate for the masses. As a result, it is likely to have more ETF closures than peers that stick to the basic building blocks.  
The firm’s active fixed-income and multi-asset efforts also stand out as some of the best in the industry. Those benefit from BlackRock’s commitment to building a first-class risk management system via its Aladdin analytics software. The software is also available for sale to other firms and has proved to be a popular option for competitors, a testament to its usefulness. 
More recently, the firm has shifted its focus to ESG offerings and incorporating ESG across its investment lineup, leading to a political backlash in the United States.
BlackRock isn’t the best at everything it tries to do, but retail investors, financial advisors, and large institutions could all build robust portfolios using BlackRock’s products.

Parent

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